South Korea's government, concerned the battle for mobile phone subscribers was disrupting Asia's fourth-largest mobile market, imposed a cooling-off period on the three main competitors on Monday.
The Information and Communication Ministry barred the firms from signing up new subscribers for up to 40 days, penalising them for having used what it considered overly aggressive subsidies to woo customers.
Investors welcomed the widely expected measures, which would reduce marketing costs that have surged after the introduction of number portability triggered a margin-slicing round of subsidies.
"The government took severe measures against the mobile firms as they have repeatedly ignored government warnings against illicit subsidy provisions, disrupting the mobile market," the ministry said.
"Market disorder has intensified as companies even use a non-regular subscription network, such as marketing through employees and street sales as well as providing special discounts for corporations."
Top mobile firm, SK Telecom Co, received a 40-day suspension on signing up new customers, while KTF Corp got a 30-day ban and LG Telecom Ltd a 30-day ban for similar violations, the ministry said.
It said the information minister would determine later when the suspensions would begin.
Investors and traders pushed up shares in the three firms, despite the widely-anticipated move to penalise them.
Analysts said handset makers such as Samsung Electronics Co and Curitel Communications would be hurt in a market where three-quarters of South Korea's 48 million people carry at least one mobile phone.
The government action comes as mobile carriers have been forced to ratchet up marketing expenses by more than a third so far in 2004 from a year ago to fend off red-hot competition.