Whether SKT's 'Market Dominant Business Position' Will Change

SK Telecom (CEO Yoo Young-sang) has seen its mobile communication market share drop below 40 percent for the first time in 10 years. Some in the industry are paying attention to whether SK Telecom will be able to maintain its current status as the dominant operator in the market. Some say that since its market share has dropped by a relatively large margin compared to the previous one, which was over 50 percent, it is premature at a time when the government is making every effort to recover from the hacking incident.

According to the wireless communication service subscriber statistics released by the Ministry of Science and ICT in May, SK Telecom had 22.49 million mobile phone subscribers as of May, accounting for 39.31 percent of the entire market. The number of mobile phone subscribers decreased by 425,218 (0.77 percentage point) from April (22,924,260 and 40.08 percent), but this is the first time that the 40 percentage point barrier has collapsed. Since the 50 percent market share was broken in February 2015, it has collapsed to the 40 percent level for the first time in 10 years.

In contrast, KT (CEO Kim Young-seop) recorded 23.78 percent (13.61 million 780) and LG Uplus (CEO Hong Bum-sik) recorded 19.45 percent (11,131,466). The number of KT subscribers increased by more than 190,000 in May from 13,413,968 in April, while LG Uplus also increased by about 140,000 from 10,992,877.

This is why some in the industry say that SK Telecom's market dominance has declined relatively, and that it is set to lay down its market dominant position. An industry official said, "There is a possibility that SK Telecom will ask the government to lift its market dominant position as its market share is steadily falling, unlike in the past, when the market share exceeded 50 percent."

Under the Telecommunications Business Act, key telecommunications service providers such as mobile carriers are designated as market dominant service providers if their market share exceeds 50 percent. Since its merger with Shinsegi in 2000, SK Telecom has secured a solid position as market dominant service provider by over 56 percent.

According to the Fair Trade Commission's "Market-dominant Abuse Review Criteria," if the operator is to be designated as a market-dominant operator, it will be judged by comprehensively considering market share, the existence and degree of entry barriers, the relative size of competitors, the possibility of joint actions between competitors, the existence of similar products and adjacent markets, market blockade, and financial power.

Once designated as the dominant market operator, the pricing plan cannot be changed at will. For this reason, SK Telecom is subject to the reservation system, which requires approval from the Ministry of Science and ICT when establishing, raising or lowering pricing plan. KT and LG Uplus, on the other hand, are subject to the licensing system.

As only SK Telecom has been designated as the dominant market operator, there have been constant calls for changes. The Korea Information and Communications Policy Institute (KISDI), a think tank for information and communication policies, said in a report entitled "A Study on the Methodology for Evaluating Joint Dominance to Revitalize Competition in the Telecommunications Market" in February that it is also possible to impose market-dominant obligations on multiple operators as part of regulations on oligopoly market.

Kim Hyun, a member of the National Assembly's Science, Technology, Information, Broadcasting, and Communications Committee (Minjoo Party of Korea), said at a parliamentary audit of the National Assembly in October last year, "The scope of the reservation reporting system, which only applies to SK Telecom, should be expanded to KT and LG Uplus."

Some view it as opposed to this. "Although SK Telecom's market share has decreased somewhat, there is a possibility that SK Telecom will increase at any time," another source said. "We are not in a situation to discuss the termination of our position right now."

SK Telecom says it has no intention of considering lifting its market dominant position immediately. A company official said, "We are not considering lifting our position under the current circumstances."

fun3503@chosunbiz.com