S. KOREAN MOBILE CARRIERS BRACE FOR LOOMING PRICE COMPETITION.

SEOUL, Oct 1 Asia Pulse - Hard pressed by the government and civic groups, South Korea's top mobile carrier SK Telecom Co. (KSE:017670) recently announced a long-awaited but controversial discount scheme beginning next month to reduce their customers' growing communications spending.

The market leader's move prompted the other two smaller players - KTF Co. (KSE:032390) and LG Telecom Ltd. (KSE:032640) - to consider a similar measure, ushering in price competition in the nation's nearly saturated communications market, experts say.

On Sept. 19, SK Telecom said it will offer a 50-percent discount for calls made between its 21-million customers starting next month when they pay an additional 2,500 won (US$2.71) in basic fees. The exact date for the launch has yet to be decided.

The so-called "inner-network discount" scheme has been a hot potato among the three mobile carriers, which have faced mounting customer demand to cut rates, while at the same time shielding themselves from a bloodletting price war.

The controversial discount scheme was first introduced in 1998 as the government tried to stimulate market competition but was withdrawn in 2002 when SK Telecom's market share exceeded 50 per cent.

KTF and LG Telecom claim that the reintroduction of the inner-network discount would help SK Telecom gain more market share but they are also busy offering similar rate cuts to prevent their customers from leaving for the bigger rival.

"We are well aware of the concern that the discount scheme could worsen a market imbalance but we still think we need it to move toward price-oriented competition from the current blood-letting subsidy-centered one," Information and Communication Minister Yoo Young-hwan told reporters at a press conference.