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Telecoms’ sales halted due to illegal subsidies

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Published : 2013-01-06 19:15
Updated : 2013-01-06 19:15

Excessive and illegal smartphone subsidies have led the country’s three mobile carriers to sequentially stop signing up new customers starting Monday.

LG Uplus, the country’s smallest mobile carrier, will be the first to be prohibited by the government from recruiting new customers for 24 days beginning on Monday. SK Telecom will then follow suit from Jan. 31-Feb. 21 as well as KT from Feb. 22-March 13.
A man walks past a mobile phone shop in Seoul. (Yonhap News)

The firms were also fined a total of about 11.9 billion won ($11 million).

This is the first time that the government has simultaneously granted business suspensions as well as fines to the three telecoms.

The current law states that smartphone subsidies must not exceed 270,000 won. However, the price of a nearly 1 million won Samsung Galaxy S3 smartphone went as low as 170,000 won, after 800,000 won in subsidies.

Some customers may believe that offering excessive subsidies in smartphone purchases benefit consumers.

Subsidies are one of the marketing methods used by the telecoms to lower the cost of smartphones.

It is definitely true to say that offering subsidies was one of the easier methods that have contributed to the growth of total customer figure for the companies.

This is why they choose to inject more money in offering subsidies rather than improving the quality of their networks and research and development.

The cheap smartphone prices have also lured many customers to make the switch when they don’t need to do so.

By Cho Ji-hyun (sharon@heraldcorp.com)

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