To: Maurice Winn who wrote (5052 ) 10/9/2002 10:56:06 AM From: waitwatchwander Respond to of 12252 KT's privatization in dispute at WTO koreaherald.co.kr Although KT Corp. has completed the privatization process, the United States, European Union (EU) and Canada took issue with KT's status at the World Trade Organization (WTO), government sources said yesterday. The dispute is delaying the procedure, initiated by the Korean government on Sept. 4, which would exclude KT from the Government Procurement Agreement (GPA). KT intends to be excluded from the application of the GPA by showing that its privatization is complete. Korean government officials expressed displeasure about the dispute in a GPA committee meeting at the WTO headquarters in Geneva Tuesday. Notably, Korean officials argued that some members, including the United States, opposed the exemption without offering concrete reasons or evidence. The Korean government set about privatizing KT in 1993. In May this year, the government sold its entire stake and a general shareholders' meeting Aug. 20 sealed the privatization process. KT, which was spun off from the Korean government in 1981, is widely regarded as a company that helps accelerate competition and improve efficiency in the telecom market. The telecom operator appointed three additional external directors, to a new total of nine, a measure aimed at stepping up supervision and management independence. The Ministry of Information and Communication is now unable to exercise its voting right for shares it held, allowing KT to make its own decisions free from tight regulations. KT also raised the foreign ownership ceiling from 37.2 percent to 49 percent, an issue that has drawn keen interest from foreign investors as well as analysts. Korean officials in Geneva pointed out that they sincerely and thoroughly answered questions regarding the privatization of KT in separate negotiations with the United States and the EU. Therefore, the United States and the EU should submit their reasons for opposition to the exclusion as soon as possible, Korean government officials said. However, the United States, EU and Canada repeated their stance that more time is needed to check whether KT is free from the influence and control of the Korean government. WTO members are obliged to notify any change in the status of state-run agencies to the GPA committee. As long as other members show no opposition, companies in question are usually excluded from the GPA list. The WTO is set to hold the GPA committee meeting within December to deliberate on KT's status, but if those three countries remain opposed to the change, the dispute is likely to drag on indefinitely. A similar case is NTT, a telecom giant of Japan, which completed the privatization process three years ago and has yet to be excluded from the GPA list. In late August, KT confirmed the appointment of Lee Yong-kyung as CEO at a meeting of shareholders and wrapped up the drawn-out privatization procedure to emerge as a full-fledged private telecom giant. SK Telecom had purchased an 11.34 percent stake in KT when the Korean government unloaded its entire stake in an attempt to privatize the company in May. SK Telecom is currently under pressure to dispose of its 9.55 percent stake in KT. KT owns a 9.27 percent stake in SK Telecom, a mutual stake holding that has sparked disputes about the overhang issue - widespread concerns about possible downward gyrations of share prices when either KT or SK Telecom dumps its stake in each other on the stock market. Apart from the stake holding squabble, KT CEO Lee said KT will focus on restructuring "software" such as reshuffles of personnel as the company has completed its "hardware" restructuring through job cuts. Since 1997, KT has trimmed its workforce from 60,000 to 44,000, helped by its spin-off strategy involving its sprawling units including the phone directory service unit. KT, which virtually controls the country's fixed-line and broadband network, maintains high-speed Internet infrastructure and provide reliable telecom backbone services. Analysts said other telecom carriers are worried about KT's market dominance, based on its monopolistic control on the network infrastructure. Its huge potential in both fixed and mobile sectors is now sending alarms to its rivals including SK Telecom, LG Telecom and Dacom Corp. Up until recently, KT has been restricted in doing business largely because of its status as a state-run telecom operator. Government officials often interfered with the appointment of key officials and the overall strategy, which in turn gave some maneuvering room for its competitors. KT has two mobile units: KTF, the country's second largest mobile carrier, and KT ICOM, a unit founded for operating W-CDMA service. (insight@koreaherald.co.kr By Yang Sung-jin Staff reporter 2002.10.10