Additional Price Reductions Expected for Mobile Services

Beginning 2008, mobile phone users will be able to send an SMS at 20 won per message, down from the current 30 won.

LG Telecom announced last Friday that it will lower its SMS fees from the current 30 to 20 won per message. This follows SK Telecom’s decision to do the same in October, and KTF’s decision to do the same on December 20.

With LG Telecom’s announcement, the full-fledged price war between the nation’s mobile carriers, pushed for by the Ministry of Information and Communication, that began this October has resulted in the mobile carriers now offering price discounts for phone calls within the same network, and a 10-won cut in SMS fees.

The mobile carriers announced that due to these measures, mobile phone users will enjoy price reductions that amount to a total of 1.4260 trillion won, equivalent to 7.5 percent of total annual sales and 39.7 percent of total annual operating profits.

They added that with the total number of SMS sent annually reaching around 80 billion, mobile phone users who frequently send them, such as teenagers, will benefit more from the 10-won cut, the first SMS fee reduction since 1999.

Experts in the industry predict that although there will not be any additional price reductions, mobile carriers will further reduce prices for users by introducing package products that offer discounts, and by reducing costs through cutting marketing costs.

This outlook is based on the fact that merger and acquisitions deals between KT and KTF, and LG Dacom and LG Powercom have all surfaced. In addition, former CFO Ha Seong-min has been appointed as the head of SK Telecom.

Regarding President-elect Lee Myung-bak’s pledge to cut mobile service fees by 20 percent, experts in the industry say the goal is easily achievable through price reduction effects that naturally occur from competition between Korea’s three major mobile carriers.

An official from one of the mobile carriers said, “Because the intra-network discount system and SMS fee cuts have been led by the government, the three major mobile carriers have had to come up with more or less similar discount offers. However, the new government favors market-led price cuts. So this time, mobile carriers will be able to offer diverse forms of discount deals, such as package combinations between online and offline products or mobile and broadcasting services.

nex@donga.com