SK Telecom agrees to cut basic mobile rates

(ATTN: ADDS more info in para 2-3; ADDS analyst comments from para 8)
By Lee Youkyung
SEOUL, June 2 (Yonhap) -- South Korea's top mobile carrier SK Telecom Co. has agreed to cut its basic monthly service rates by 8 percent in line with government efforts to curb high inflation, the telecommunications regulator said Thursday.
SK Telecom's move, to be effective in September, will help reduce mobile service rates by about 28,000 won (US$26) per person every year, the Korea Communications Commission (KCC) said in a media briefing.
SK Telecom said that it will also introduce a set of revisions to its smartphone subscription plans, estimating that the measures will cost the company 748 billion won ($694 million) per year.
KT Corp. and LG Uplus Corp. will likely follow SK Telecom's move, a KCC official added. SK Telecom, which controls about half of the country's wireless market, will also offer 50 free text messages per month.
Mobile tariff cuts were broached by the government earlier this year as one of the measures to rein in runaway inflation. South Korea's consumer price index was up more than 4 percent for a fifth straight month in May.
In March, the government launched a task force, which consists of government officials, industry representatives, consumer advocates and experts, to discuss ways to ease telecommunications rates, which rose in line with the spread of smartphones.
The number of smartphone users in the country hit 10 million in March, about a 10-fold growth from January 2010, and mobile service fees for smartphone users are about 30 percent higher than those for cell phones that can only handle voice calls and text messages.
Telecommunications fees that include mobile phone and broadband Internet services jumped 4.8 percent in 2010 from one year earlier, reaching the highest level since 2003, according to Statistics Korea.
Market watchers said that tariff cuts will hurt the bottom lines of mobile carriers, with the smallest carrier LG Uplus likely to suffer the biggest blow if it also moves to cut its mobile rates.
"All (analysts) will downgrade earnings forecasts," said Yang Jong-in, Korea Investment & Securities Co.'s analyst.
Others said that telecom rate cuts are politically motivated. Yang Moon-seok, one of KCC's five policymakers, wrote in a critique posted on his blog that the 1,000 won cut is a populist policy that will do little to reduce mobile rates.
"There might be some political gains, but it could hamper network investments and consumer benefits will be minimal," said Eugene Investment & Securities Co.'s analyst Daniel Kim.
ylee@yna.co.kr