SEOUL, KOREA - The annual combined marketing cost for three mobile telecom service firms last year was as much as 8 trillion won. It was largely due to the profligate use of subsidies offered to customers to gain market share at the expense of others. According to telecom service industry sources on February 5, the total marketing cost expended by the three telecom companies including SK Telecom, KT, and LG U+ was 7,945.2 billion won, up 2 percent from the previous year's 7,788.0 billion won.
By company, SK Telecom, KT, and LG U+ spent 3,428.0 billion won, 2,681.0 billion won, and 1,836.2 billion won, respectively. Comparing to 2012, SK Telecom spent 1.3 percent less while the remaining two paid out 4.7 percent more. Although most of the market cost went to pay for subsidies, other items included promotion and advertising and membership operating cost.
Industry analysts predicted however that this year will see the marketing expenditure to shrink as the share of LTE subscribers in all mobile phone service members has reached more than 50 percent. Instead of competing to take customers away from rivals, they will focus more on retaining existing customers.
Moon Ji-hyun, KDB Daewoo Securities analyst, said, "It is likely a law to improve handset distribution structure currently pushed by the Ministry of Science, ICT and Future Planning and a regulation to strengthen the ban on handset subsidies enforced by the Korea Communications Commission will have impact on a significant decline in the marketing cost for the telecom firms."
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