SK Telecom, Samsung at war over phone bills

Telecom industry giant and world’s No. 2 phonemaker struggling to shirk blame for high call fees


SK Telecom and Samsung Electronics, known for their airtight alliance on phone marketing and sales, are showing signs of a major rift with both parties attempting to shift blame for spiking call fees, according to industry watchers.

On the government’s mounting demands on telecom companies to slash the fees, industry leader SK Telecom has been leading a campaign for lashing out at phonemakers such as Samsung, saying the manufacturers were the real cause of the high fees.

The telecom industry’s main argument is that the phonemakers are demanding too much for their phones, which are then camouflaged with the “subsidies” given to customers.

In most cases, the subsidies are offered a joint effort from both the telecom carriers and the phonemakers.

Subsidies can be up to 200,000 to 300,000 won ($270), but then the customers are forced to sign onto expensive call plans usually lasting up to two years. In addition, they must pay for the handsets.

Phonemakers argue that it was the telecom carriers that first wanted to launch the subsidies as a part of their marketing strategy to attract more customers.

Samsung Electronics executives said SK Telecom, after deciding to give out subsidies years ago, later on forced the phone manufacturers to join.

Samsung also says it could lower the suggested retail price of their phones if they were not forced to pitch in for the subsidies.

The squabble between the telecom carriers and the phonemakers comes on the heels of an investigation the Fair Trade Commission launched last week on both telecom carriers and phone manufacturers.

The agency suspects both parties to be guilty, as it said it would investigate whether the two sides collaborated to keep the retail prices high in order to maintain the subsidies and along with them, the expensive call fees.

The controversy surrounding subsidies and high phone fees are nothing new, but the government appeared determined this time around to slash the cost of phones to consumers, especially as more and more people are signing for expensive smartphones that cost up to 800,000 won.

With more than one-fifth of the population using smartphones, the state-run Korea Communications Commission, the Finance Ministry and the Fair Trade Commission have formed a task force to look into reducing costs for consumers.

Another issue they will be looking into is that smartphones are considerably more expensive here compared to most other nations where phonemakers have launched their products.

Smartphones produced by Samsung, LG and Apple are an average of 30 percent more expensive compared to those sold in the U.S., according to price data.

For instance, Samsung’s Galaxy S is sold at 890,000 to local consumers, while the same phone is sold at $499.99 to American consumers.

Samsung, which has been gradually lowering the price of its older smartphones after releasing their newer lineups, is said to be considering slashing retail prices.

But it also indicated it would stop giving out subsidies, which would mean that in the end, the consumers would not receivie any huge benefits, according to critics.

SK Telecom also was reportedly disturbed by Samsung’s decision as this means it would have to burden a bigger share of subsidies.

Subsidies were once banned in 2006, but were quickly reinstated.

The government has previously cracked down on the industry several times for spending too much of their funds on marketing, which in turn raised the costs for consumers.

Last year, the Korea Communications Commission issued a guideline calling on telecom firms to limit their marketing expenses to 20 percent of their total sales.

By Kim Ji-hyun (jemmie@heraldcorp.com)