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LG Uplus makes risky bet

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(Globalpost/GlobalPost)

LG Uplus has received a mixed response from the market over its decision Thursday to offer unlimited voice call price plans, belatedly joining its biggest rival KT and the market leader SK Telecom.

Some say it was an inevitable choice for the smallest carrier but many claim it is a risky bet as the latest price plan is expected to place a financial burden on the firm in the long term.

Many analysts said it’s uncertain whether the Uplus plan will yield visible results.

Simply put, customers who register for Uplus’ 69,000 won monthly pricing plan have unlimited voice calls without additional charges even to customers using rival services.

Uplus’s cheapest free call plan also offers 5-gigabytes (GB) of data, an amount that exceeds the average customers’ needs.

The majority of subscribers prefer plans that cost around 50,000 won monthly, and offer 2 GB of data, according to officials.

Uplus CEO Lee Sang-chul admitted the plan could cut its annual revenue by as much as 600 billion won because Uplus can’t charge for heavy voice call use under the plan.

"We can say the impact will be short-lived. The pricing plan introduced by LG looks attractive. Some KT and SK Telecom customers who pay more than 100,000 won monthly are going to change to LG, helping Uplus see increased average revenue per user (ARPU). But this is short-term as KT and SK Telecom should release similar plans,’’ said Hyundai Securities analyst Kim Mi-song in a note to clients.

"LG is a troublemaker in the local telecom market. Consumers will get more benefits as they can experience qualified voice calls without the price burden. But telecommunications companies will see deterioration in profits. Let’s see what happens. The next two or three months are critical for LG,’’ said an official at KT, asking not to be identified.

Uplus CEO Lee vowed to release plans allowing for more options in data use. Choi Yoon-mi, an analyst at Shinyoung Securities, said ARPU from LTE users will rise, helping LG to offset falling revenue due to the plan. ARPU is a critical measurement to gauge the profitability of carriers.

Choi Nam-gon at TongYang Securities differed, saying the local telecom market will see another round of ''illegal subsidies’’ cornering the Korea Communications Commission (KCC), the local telecom regulator.

The Korea Times

http://www.globalpost.com/dispatch/news/asianet/130412/lg-uplus-makes-risky-bet