KT, LG Uplus may not cut base rates

Melissa Chua
06 Jun 2011
Daily News

South Korea’s Korea Telecom (KT) and LG Uplus are unlikely to cut base rates in response to pressure from authorities to lower fees, according to reports.

The update stands contrary to earlier claims from regulator KCC that the country’s two smaller carriers would likely follow market leader SK Telecom’s decision to cut base rates by 1,000 won ($0.93) in a bid to stem overly high telecoms charges in the country.

Joong Ang Daily cited industry sources who said KT and LG Uplus would be unable to cut base rates by the same amount due to their smaller revenue bases. Sources said the two companies would face difficulties financing infrastructure upgrades should they follow SK Telecom’s example.

KT and LG Uplus have yet to reveal their plans to reduce fee burdens, but KT CEO Lee Suk-Chae had said at a press conference last month that the company was considering offering lower rates to seniors or low-income households.

The country’s three operators already offer discounted plans for teenagers.

SK Telecom had earlier targeted seniors and adolescents as beneficiaries of reduced rates but changed course as the strategy only affected a small portion of the population.

An LG Uplus official told Joong Ang Daily the company was already charging the lowest fees in the market and reducing the basic rate would be difficult. The official added the company would be weighing its options till September, when SK Telecom’s rate cut takes effect.

It remains uncertain as to whether KT and LG Uplus can avoid dishing out the same rate cut as SK Telecom due to pressure from the KCC. Market competition has traditionally seen the two smaller players follow suit whenever SK Telecom made a price adjustment.

The 1,000 won fee cut has meanwhile been mocked by the public and economists alike for being both politically driven and ineffective.

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