LG U+ becomes first of Korea’s three operators to face customer sign-up freeze over illegal subsidies

South Korea’s three mobile operators were hit by a cumulative $40.1 million dollar fine for illegal mobile subsidies last month, and now the country’s Fair Trade Commission (FTC) has begun its second course of action, suspending the carriers from signing up new customers for fixed periods.

LG U+ is the first to face a freeze on new sign-ups, which starts today and will run for 24 days, the Yonhap reports. Following the end of the LG U+ ban, SK Telecom will be forbidden from recruiting new subscriptions between January 31 and February 21, while KT’s customer freeze will run from February 22 until March 13.

This is the first time that the Korean authorities have taken action against all three operators consecutively. The FTC made its move in response to what the authorities call ‘excessive competition’.

While competition is seen as positive for consumers in many markets worldwide, since it helps to drive lower pricing and bargains for shoppers, Korea’s stance is different. The three operators broke regulations that limit operator subsidies to 270,000 won (circa $254) per device.

That rule was breached on a number of high-end devices which were given prices to make them more appealing to consumers. The Korea Herald explains that, in one example, the price of the Samsung Galaxy S3 was reduced from almost 1 million won (around $940) to as low as 170,000 won (around $160). At a discount of 800,000 (circa $752) such an operator subsidiary is in violation of the regulations in Korea.

To make up for the inevitable slow down it will face by the sign-up freeze, LG U+ has begun appealing to its existing userbase offering discounts on feature phones and gifts for customers who upgrade to smartphones. Strictly within the rules this time, of course.

Korea’s mobile market is rapidly evolving and statistics from August showed that two thirds of Korean adults owned a smartphone, with devices from Samsung, LG and Apple the most popular. While Apple has found success in Korea, the country is difficult for overseas firms. Both HTC and Motorola exited the market last year, unable to compete with the local firms and the country’s unique regulations.