Friday, May 14, 2010

South Korea to Cap Telecom' Marketing Costs

The Korea Communications Commission (KCC), South Korea's telecommunications regulator said on Thursday that it will limit the amount telecoms companies spend on marketing in a move aimed at cooling intense competition and boosting profits in one of the world's most saturated telecom markets.  As reported by The Wall Street Journal, the KCC said that the country's major mobile operators --including KT, SK Telecom, LG Telecom --should not spend more than 22% of their respective revenues from fixed-line and wireless businesses on marketing.   The regulator said it expects the move, which takes effect from May, to lower total marketing costs to 7.03 trillion won ($6.14 billion) this year, sharply down from 8.02 trillion won spent last year.
In order to ensure companies follow the guidelines, KCC said it will conduct an industry inspection in June and take strict action against companies that have spurred marketing competition by giving heavy subsidies on handsets or offering free gifts.
The introduction of Apple's iPhone last Fall, followed by the release of Android and other competing smartphones have contributed to the increased marketing costs.  In other words, the current intense competition is part and parcel of the so-called "iPhone effect" or "smart-phone shock" here.

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