South Korea’s controversial handset subsidy limit will be discontinued at the end of September after being in effect for three years, The Korea Times reported.

The subsidy cap, introduced by the Korea Communications Commission (KCC) in October 2014, was set at KRW330,000 ($295) for new handsets to: “eradicate irregular and guerrilla subsidy benefits that only some consumers have enjoyed”. The cap was introduced as a part of the country’s new Telecom Act designed to promote fairer competition among mobile operators and to encourage handset makers to lower prices.

However, the subsidy did not apply to smartphones on the market for more than 15 months, which prompted operators to offer bigger discounts for older models in order to dispose of excess stock before the release of new models, The Korea Times said.

Removing the subsidy means the country’s three major mobile operators – SK Telecom, KT and LG Uplus – will be able to offer more attractive subsidies for smartphones purchases.

The operators were fined multiple times by the KCC for flouting the regulation.

A KCC representative said it will introduce other measures to stabilise the market once the subsidy cap is removed, The Korea Times reported.

Market reform
In early August the Ministry of Science and ICT said it would raise 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 effective from 15 September. The increase, part of President Moon Jae-in’s campaign pledge to reduce telecoms expenses, faced stiff opposition from operators which were concerned the move would impact profits.

However, the operators said last week they will not take legal action against the move.

The country’s Constitutional Court ruled in May the law imposing a cap on handset subsidies offered by the country’s mobile operators is legitimate. A challenge filed in early October 2014 shortly after the law went into effect, argued the cap infringed on consumers’ right to pursue a fair contract and goes against the principles of a market economy.