South Korea’s mobile operators are up in arms about a controversial government plan to require the market leader to offer a low-cost, flat-rate plan, complaining the move involves too much government intervention and would hurt the industry’s profitability, The Korea Times reported.

The government, in its work to update the Telecommunications Business Act, proposed introducing a so-called universal fare plan requiring SK Telecom (SKT) to offer 200 minutes of calls and 1GB of data for about KRW20,000 ($16.60) a month, the newspaper said.

The second and third ranked players – KT and LG Uplus – argued they will be forced to follow SKT’s lead and match the low rates.

Lee Sang-heon, head of SKT’s corporate relations strategy office, said during a Regulatory Reform committee meeting: “Introducing unified rate systems, such as a universal fare plan, means forcing telecom companies not to conduct marketing activities. If the government designs a fare plan every two years, there will be no need for firms to compete with each other.”

Profit impact
The operators also said the proposal would lower profits, leading to a possible reduction in service quality at a time when all three companies are ramping up investment in 5G infrastructure, The Korea Times reported.

An SKT representative told the newspaper: “The three telecom companies’ operating profits could be reduced by about 60 per cent once a universal fare plan is introduced.”

Government and SKT representatives failed to reach an agreement at the last committee meeting – the next is scheduled on 11 May.

Delivering on President Moon Jae-in’s campaign promise to reduce household telecoms expenses, the Ministry of Science and ICT in September 2017 raised the level of discount mobile operators must offer customers who sign up for new one- or two-year contracts from 20 per cent to 25 per cent.

The discounts are expected to slow operators’ revenue growth, with FnGuide forecasting consolidated revenue of the three operators to increase just 0.3 per cent year-on-year to KRW53.4 trillion ($50.2 billion) this year. Both SKT and KT reported declines in service revenue in Q1.