A visitor to an experience zone of Samsung Electronics’ Galaxy S24 smartphone in Seoul tries out AI feature of the new smartphone, Jan. 28. Yonhap
SK Telecom, KT and LG Uplus are facing continued pressure from the government to lower their customers’ monthly bill payments. However, according to industry officials and experts on Monday, concerns have been raised that such price cuts could lead to a reduction in their capacity to invest as well as decrease the overall level of industrial competitiveness.
To reduce the burden on households, the Yoon Suk Yeol administration has been pushing for a reduction in monthly bill payments, asking the mobile carriers to offer lower price plans and enhance benefits for socially vulnerable groups.
In response to the government’s demands, telecommunications companies have allowed users to subscribe to both 5G and the slower LTE services since the beginning of this year, and a low-cost 5G plan of around 30,000 won (around $22) is also expected to be released soon.
However, with the April 10 general elections approaching, the government has continued to pressure the companies to offer lower fees, sparking concerns over political interference in market regulations.
“While there are investors hoping that the government-led Corporate Value-up Program could ease regulations on domestic telecommunications companies, the likelihood of this becoming a reality is slim,” Kim Hong-sik, a researcher at Hana Securities, said. “This is because telecom firms are still reluctant to invest in networks, and the issue of communication fees is closely related to the elections.”
The government’s latest action to lower monthly bills came last week as Kim Hong-il, chairman of the Korea Communications Commission (KCC), a state-run communication services regulator, asked top executives of the mobile carriers and mobile phone makers – Samsung Electronics and Apple – to increase subsidies for users who change their mobile carrier when purchasing new phones.
“During the meeting, the chairman specifically requested the operators’ special cooperation regarding the recently introduced policy of support funds for switching to alleviate the burden of household communication expenses and to vitalize competition,” the KCC said.
Support funds for switching refers to a system where mobile carriers can provide subsidies when consumers switch carriers upon purchasing new phones. It is designed so that users who subscribe to expensive monthly plans can receive more subsidies.
From left are Samsung Electronics President Roh Tae-moon; LG Uplus CEO Hwang Hyeon-sik; Kim Hong-il, chairman of the Korea Communications Commission (KCC); SK Telecom CEO Ryu Young-sang; KT CEO Kim Young-shub; and Apple Korea Vice President Ahn Cheol-hyun who pose for a photo during their meeting at the Korea Press Center in Seoul, March 22. Courtesy of KCC
“We requested the mobile carriers and mobile phone manufacturers to expand the subsidies, and they promised to actively cooperate,” Pan Sang-kwon, director of government affairs at KCC said, after the meeting. “It is expected to be increased to a level that can be felt by the public.”
In response to the request, the three mobile carriers announced on March 23, the next day, that they would provide subsidies ranging from a minimum of 30,000 won to a maximum of 330,000 won.
Industry officials said the government’s continued pressure to lower prices would result in reduced investment capacity of the companies.
“The telecommunications business essentially requires a lot of capital investment, such as network equipment investments. While it is natural to align with government policies, support for measures that can invest more in the transition to the AI era, preparation for the upcoming 6G network and new businesses, such as air mobility and self-driving cars, are also needed,” an official in the telecommunications industry said on condition of anonymity.
Kim Yong-jae, a business professor at Hankuk University of Foreign Studies, said Korea’s communications fees are not as expensive as some other developed countries such as the United States, Germany, Sweden and Japan.
“Korea’s telecommunication fees cannot be considered cheap, but they are not excessively expensive either. Looking at the overall level of fees, they are around the average,” the professor said during a forum held last September, hosted by Rep. Kim Yeung-shik of the People Power Party. “Especially when bundled with wired products, Korea’s fee level is relatively cheaper.”
The government’s pressure to lower cell phone fees appears to have been somewhat successful in slowing the increase in household telecommunication expenses. According to the statistics from Statistics Korea, the average monthly mobile bill per household last year was 128,000 won, up 3.5 percent from 124,000 won in 2021, but the amount remained the same as in 2022.
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