SK Telecom to cut mobile tariffs by $696 mn

SEOUL, S.KOREA: SK Telecom, South Korea's dominant mobile carrier, unveiled a mobile tariff savings plan worth $696 million annually as it came under pressure from the government trying to tame inflation in Asia's fourth-largest economy.

In a move, which is likely to trigger its smaller rivals -KT and LG Uplus - to follow suit, SK Telecom said on Thursday it would cut monthly mobile basic fees by 1,000 won and offer up to 50 free short text message services per month starting from September.

The new pricing plan will help SK Telecom subscribers to save 28,000 won annually on average, according to the Korea Communication Commission.

KT and LG Uplus spokespersons said on Thursday that they were considering lowering monthly basic fees and other measures to cut tariffs.

South Korean regulators have delayed the announcement of the mobile tariff cut, as the ruling party had called for sharper cuts to tame inflation pressure, while operators warned drastic cuts may deter their investment plans at a time when explosive growth in smartphone users require an upgrade in networks.

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South Korea's annual consumer inflation eased slightly in May from April but stayed above the upper end of the central bank's target band for a fifth consecutive month, while the core inflation spiked to a 2-year high.

Mobile phone tariffs have a slightly more than 3 per cent weighting in South Korea's consumer price index.

Shares in LG Uplus , the country's smallest mobile operator, dropped as much as 3.3 per cent on Thursday prior to the announcement by SK Telecom.

Plan will have a limited impact on SK Telecom revenue

Shares in SK Telecom closed down 0.6 per cent and No.2 player KT fell 0.9 per cent versus a 1.3 per cent drop in the wider market .

"The actual cut will be less than SK Telecom's announcement, and the plan will have a limited impact on SK Telecom revenue. Should other carriers follow suit in cutting basic fees, LG Uplus will be most affected among the three carriers because it is least profitable among the three," Kang Ji-hoon, an analyst at Samsung Securities, said.

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SK Telecom's new pricing package also includes a new plan aimed at smartphone users. It plans to introduce a package that allows customers to tailor their pricing plan based on preference for voice, data and text message services.

The regulator also plans to overhaul the handset distribution system this year allowing consumers to directly buy mobile phones from manufacturers bypassing wireless carriers.