Korea Telcos:Cut wireless estimates as policy pressure continues

Korean telcos still face uncertainty over the timing and extent of tariff cuts. TheKorean telcos have decided not to challenge the government’s decision to raise thetariff discount rate. As the tariff was already hurting growth at its prior level of 20%,the increase to 25% has further exacerbated the situation. Further, the government isexploring new measures to cut costs for low-income and elderly consumers. Thiscould take the form of a mandatory discount for elderly customers and a cKRW30k1GB data plan for low-income customers. Depending on the exact form of themeasures, 3-6m customers may be eligible for these discounts.

    Expiry of the subsidy cap appears to be less of an issue. The Korean telcos havehad to abide by a KRW330k cap on per-handset subsidies since October 2015. Thisis set to expire at end-September, but we are less concerned about a return to theextremely high marketing spend and volatility that characterized the Korean telcomarket previously. This is because of other restrictions that remain in force