SEOUL, SOUTH KOREA (03/03/2000) - The South Korean government announced plans here yesterday for big price cuts for cellular phone users -- a move that is set to spark a price war in the country's highly competitive mobile telecommunications market.
The Ministry of Information and Communications said it will lower the call charges of market-leader SK Telecom Co. Ltd. by 15.4 percent to 22 won (2 U.S. cents) per ten seconds and the monthly charge by 11.1 percent to 16,000 won.
Others cuts include a reduction of 24.6 percent in the charge paid for calls from wireline to wireless phones to 117 won per minute and the scrapping of a 3,000 won-per-quarter charge levied on users for use of the radio spectrum.
People with low incomes, defined as 400,000 won per month or less, will receive a 30 percent discount in call charges from wireline to wireless.
SK Telecom's prices are set by the government in an effort to ensure the company, which has almost half the market, does not dominate the market. Its charges have generally been held about 20 percent higher than those of three competing PCS (personal communications service) operators: Hansol M.com Inc., Korea Telecom Freetel Co. Ltd. (KT Freetel) and LG Telecom Ltd.
The cuts, which will mean an average reduction of 16.1 percent in monthly bills for SK Telecom's users, almost wipe out the price advantage held by the smaller players, putting pressure on them to reduce their prices further and squeezing already thin profits.
Approximately half of Korea's 44 million citizens have mobile phones.