South Korea to Increase Competition with Fourth Mobile Operator

The South Korean government has said it will select a fourth telecom operator within the year in order to boost competition in a market currently dominated by SK Telecom, KT and LG Uplus, according to a news report. The Ministry of Science, ICT and Future Planning announced the plan as part of its reform bill on the nation’s mobile network services. In order to lower entry barriers—such as initial investment and the lack of sufficient frequencies—the government plans to offer the new player priority in frequency allocation and allow it to build up a nationwide network in phases rather than all at once. Market watchers expect a fourth player could eventually pull prices down for consumers. Potential candidates are expected to undergo a tough selection process as their failure to ensure a soft landing in the market could lead to huge social costs, including consumer damages. The ministry plans to collect feedback from the public in the coming weeks and will announce the final plan sometime in June.

While we have written recently about the potential consequences of reducing the number of mobile operators in a developed country—as in the U.K., with 3’s acquisition of O2—discussions of adding an operator are more common in emerging markets. South Korea is arguably the most advanced telecom environment in the world. Its government is also one of the most activist in terms of exerting control on the mobile industry; it has repeatedly fined operators for such offenses as unduly lowering prices on messaging services and offering certain discounts on devices. In this case it is taking an active role in promoting competition by inviting in a fourth participant. We believe such an addition would indeed have the desired effect, provided the operator in question is able to deliver good quality service at appropriate initial price levels. By carefully vetting candidates, allowing for a phase-in process and giving the newcomer priority in acquiring spectrum, the South Korean government is doing the right things to make the plan a success. Asking for public responses is also a good idea and if it is taken seriously would demonstrate that the government truly has the consumer’s interest at heart.

Other demonstrations of consumer advocacy on the part of the government are its plan to increase the prevalence of low-price service plans from the current 10 percent market share to 12 percent next year by offering incentives for MNOs and its abolition of the 25-year-old approval system for new service plans. Under the new bill, operators will be allowed to launch their new plans without approval so that they can respond to changing consumer demands right away.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world.

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