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Photo = Yonhap news |
[Alpha Biz= Kim Sangjin] The Fair Trade Commission (FTC) is investigating collusion allegations over the promotional payments by South Korea’s three major telecom companies. If the commission imposes fines in the trillions of Korean won, it could significantly impact their artificial intelligence (AI) investment this year.
According to industry sources on Monday, the FTC will hold a plenary meeting on the 19th and 26th of this month regarding the collusion allegations involving SK Telecom, KT, LG Uplus, and the Korea Association for ICT Promotion (KAIT). After fact-finding and a committee discussion, the FTC is expected to finalize its ruling on whether a violation occurred and the scale of the fines.
The FTC’s office believes the telecom companies shared information on subscriber growth and adjusted promotional payments to keep their subscriber counts similar since 2015. However, the telecom companies argue that they were simply following the administrative guidance of the Ministry of Science and ICT based on the “Mobile Telecommunications Device Distribution Structure Improvement Act” (also known as the "Dan-Tong Law"), enacted in 2014. The Ministry is expected to attend the plenary meeting as a reference witness to explain the special circumstances under the law.
If the FTC imposes a significant fine, the telecom companies may have to reduce their AI investments. Even if the telecom companies appeal the fines in an administrative lawsuit, they will still have to pay the fine upfront, leading to substantial cash outflows.
According to Rep. Choi Su-jin of the ruling People Power Party’s Science, Technology, Information, Broadcasting, and Communications Committee, the FTC is considering imposing fines ranging from 3.4 trillion won to 5.5 trillion won on the telecom giants. The breakdown per company is as follows: SK Telecom’s fine could be between 1.409 trillion won and 2.196 trillion won, KT’s between 1.134 trillion won and 1.689 trillion won, and LG Uplus’ between 985.1 billion won and 1.6418 trillion won.
The maximum fine could amount to 70% of the telecom companies' annual capital expenditures (CAPEX). In 2023, the combined CAPEX of the three telecom companies was 7.668 trillion won. As the companies are already reducing their CAPEX for network equipment expansion to increase AI investments, if they are required to spend a fine equivalent to their annual CAPEX, it would inevitably slow down their AI investments.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
