Korea Discount Telecom Operators Association Visits Financial Services Commission to Deliver Message
[Asia Economy Reporter Cha Min-young] Amid the possibility of banks and other financial institutions entering the Mobile Virtual Network Operator (MVNO) business, the Korea MVNO Association announced on the 12th that it visited the Financial Services Commission on the 10th to express its opposition.
The association pointed out, "Under the current MVNO-related regulations, large financial companies, leveraging their immense capital strength, can launch unprecedentedly low-priced plans below wholesale prices and attract subscribers from other MVNO operators by offering excessive gifts and giveaways. Other operators have no effective means to counter this and can only suffer helplessly."
It further stated, "If the separation of banking and commerce regulations is to be relaxed under the name of deregulating the financial industry to allow all banks to operate MVNO businesses, we request that institutional measures be established first to prevent unfair practices where financial institutions use their capital strength as a competitive tool to poach subscribers. This includes revising Article 38 of the Telecommunications Business Act to strengthen MVNO competitiveness and ensure fair competition."
Article 38 of the Telecommunications Business Act stipulates that the wholesale price calculation method should be based on the retail price of the wholesale provider (including 100% operating profit), excluding avoidable costs such as marketing and advertising expenses (RM method). This means that the mobile carriers' operating profit is fully preserved. Under these circumstances, the entry of financial institutions into the MVNO business should be blocked until a fair competition system is established.
The association added, "Currently, other MVNO operators besides financial institutions are businesses that sustain themselves through profits generated from the MVNO business. In contrast, financial institutions, armed with ultra-low-cost services (plans that cannot be profitable in the long term), use their enormous capital as a competitive weapon rather than service quality or technology. In the long run, it is clear that all operators specializing in MVNOs will be driven out of the MVNO market."
It concluded, "The association requested that the entry of financial institutions into the MVNO market be prohibited in the current situation where institutional frameworks for fair competition between financial institutions and dedicated MVNO operators are necessary."
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