re: Marketing 101
<< "Dear Kim" >>
"In my view, the major shortcoming of the pioneering third generation effort in Korea, as well as a potentially costly decision that perhaps should be examined by your committee, is the mislabeling of CDMA2000 1xRTT in Korea as 2.5G technology." - Irwin Mark Jacobs, September 10, 2001 -
>> KT Set To Begin Commercial 3G Service In 2003
Kim Deok-hyun
The Korea Times
Info-Tech
September 1, 2002
Despite a doubtful business outlook for the global mobile phone sector, KT president and chief executive Lee Yong-kyung is confident of successfully launching the company's third-generation (3G) mobile phone service in late 2003 as planned.
Its roll-out of a 3G mobile network based on wideband code division multiple access (WCDMA) technology slowly become available in the period up until next year, enabling users to download video and music up to 40 times faster than current wireless telephony systems.
"We won't put back our deadline to launch commercial services of 3G mobile telephony offered by KT ICOM,'' Lee said in an interview with The Korea Times.
Skeptics say that because of technical problems, it is still far too early to bring out the next-generation of mobile phone services. However, Lee claims the pending viability questions over the introduction of 3G mobile systems around the world is not the problem of the service itself but because of over-investment in the spectrum by telecom companies coinciding with an overall downturn of the global economy.
In Europe, 3G spectrums were auctioned off by governments that raised billions of dollars from telecommunications companies desperate for a foothold in what is expected to be the hottest segment of the future wireless market.
But, the European telecom companies spent too much money obtaining spectrum bandwidth and that put many mobile operators into a very difficult financial situation, Lee pointed out.
"I'm pretty confident about the planned launch of the 3G network. Unless things veer far from my expectations, it could be done," Lee, 59, who took the helm on August 20.
KT ICOM, the 3G business unit of KT, has earmarked 150 billion won for its 3G facility and infrastructure investments for the second-half of this year, Lee said.
"We are currently in the testing phase of the next-generation mobile service. We must confirm the stability of the system before giving our guarantee,'' he added.
As the first chief executive of fully privatized KT, one of Lee’s critical missions is a planned merger between KTF, the wireless arm of KT, and KT ICOM. For the merger plan, Lee reaffirmed his previous stance. "The merger will be completed before the commercial 3G service becomes available in late 2003," he said.
Analysts said, however, the merger could be delayed because of KTF’s lower share price and other technical problems, including the merger ratio.
"The merger is thought to be possible when KTF’s share price trades above 45,000 won per stock. Given the current price of 33,000 won, it is highly unlikely that the merger will go ahead by the end of this year," said Jin Young-wan, an analyst at Hanwha Securities.
On closing Friday, shares of KT jumped 3.6 percent or 1,900 won to 54,700 won on the Seoul bourse, after the company unveiled a plan to buy back its 3.12 million stocks or one percent of its total outstanding common shares in an effort to boost its undervalued share price.
The size of share buyback is valued at some 160 billion won. For the next three months ending November 30, KT will repurchase and cancel its own shares via three local brokerages _ LG Investment and Securities, Goodmorning-Shinhan Securities and Samsung Securities.
Daewoo Securities analyst Yang Sung-wook says KT’s plan to repurchase and cancel its one percent of outstanding equity would help push its stock price up at a time of a foreign investor buying spree. Yang suggests KT’s target share price at 63,000 won per stock, and maintains the company’s investment rating as buying.
Lee explained the move was aimed at helping boost its stock price to sooth its shareholders who have been disappointed with the undervalued stock.
"It can be interpreted as the first sign for KT’s corporate social responsibility to return more profits to shareholders as a full-privatized company," Lee said. But, he added no additional plan to boost the share price is under consideration.
KT has been under pressure for having an undervalued share price compared with its healthy underlying performance. Unlike other fixed-line telecom companies in Europe and other continents, KT reported 1.09 trillion won in net profit on sales of 11.5 trillion won for 2001, with the help of robust sales garnered from broadband Internet services.
As of the end of June, some 9.21 million homes, or 64 percent of entire households, are estimated to have broadband access to the Internet, according to data by the Ministry of Information and Communication (MIC). The figure is expected to reach 10 million by the end of the year, the ministry said.
KT has 4.33 million subscribers with a 47.1 percent market share, cementing its status as the leading broadband Internet operator. Hanaro Telecom follows second with 2.43 million customers and Thrunet, troubled with debt, ranks third with 1.3 million subscribers.
KT, formerly known as Korea Telecom, is eyeing 1.09 trillion won in net profits on sales of 12.6 trillion won for all of 2002.
Lee said the proposed plan wasn’t linked to the fact that negotiations with SK Telecom (SKT), the nation’s top mobile carrier, for a share swap became bogged down.
The talks for stock swap began after SKT unexpectedly bought a 11.34 percent stake in KT and emerged as the single largest shareholder of the fixed-line telecom giant. KT holds a similar 9.27 percent stake in SKT.
"It doesn’t make sense why SKT wanted to buy the KT stake worth two trillion won. Since SKT is not allowed any input into the management of KT, the purchase is an untenable investment," Lee said. "The talks fell into deadlock largely due to a slow and faithless response from SKT," he added.
With corporate assets valued at 22.8 trillion won nationwide, the company is the nation’s sixth biggest business conglomerates in terms of assets.
Lee said his priority for the company over his three-year tenure is to maximize returns for the shareholders, by transforming the company’s DNA to one suited for unlimited competition with the world’s leading telecom companies.
"In fact, before privatization, KT had frittered away corporate resources on non-business activities such as annual parliamentarian audits and inspections for several months every year," Lee said.
Analysts and investors want to see KT prove its growth momentum in its next earnings report now that the nation’s broadband Internet market has reached saturation levels. The company’s next weapon, wireless local area network (LAN) services, has so far been unable to cope with demand.
However, Lee believes KT’s transformation has equipped it to be more competitive as the company was first to preach the gospel of broadband Internet services three years ago. And more challenges still lie ahead. <<
- Eric - |
