[Comprehensive] "We Will Lead Innovation in Other Industries" KT Telecom's Declaration, Koo Hyun-mo's Confidence

[Image source=Yonhap News]

[Asia Economy Reporter Seulgina Cho] "We will change the paradigm of South Korea's industry."

?-telecommunications was not the end. Since his inauguration, KT CEO Koo Hyun-mo, who has been signaling a transformation from a traditional telecommunications operator to a platform business operator, has put forward "South Korea's Digital Transformation (DX)" as a new key agenda. His goal is to lead innovation in other industries within the B2B (business-to-business) market, known as the "land of opportunity."

This ambition is backed by confidence in KT's platform based on the so-called "ABC"?Artificial Intelligence (AI), Big Data, and Cloud. KT also self-assesses that its capabilities as a platform operator, built through media, finance, and ABC businesses, are sufficient. In an unusual move, the CEO personally rebutted concerns such as "empty talk" or doubts about whether the "old, bureaucratic KT with no growth" can really achieve this.

Koo Hyun-mo: "Transforming into a Digital Platform Company... Leading Innovation in Other Industries"

At the 'Digital-X Summit 2020' held on the 28th at the Grand Intercontinental Seoul, CEO Koo stated, "KT's AI, Big Data, and Cloud-based platform services are being applied across many industrial sectors, contributing to the discovery of new growth engines," adding, "We will lead the paradigm shift in South Korea's industry based on our preemptive DX capabilities and mutual growth and cooperation."

In his first official briefing, CEO Koo emphasized, "Many people think of KT as a company with no change and no growth," and declared, "We will transform from a telecom company (Teleco) to a digital platform company (Digico)." He explained, "KT used to generate 100% of its revenue from telecommunications, but now about 40% comes from non-telecom sectors," and added, "Starting this year, we will make digital innovation our new growth engine."

CEO Koo aims for a 50-50 revenue split between telecom and non-telecom sectors by 2025. His ultimate goal as a digital platform operator is to become a platform company that drives changes in customers' lives and leads innovation in other industries.

To this end, KT unveiled a new B2B brand, "KT Enterprise." The slogan of KT Enterprise is "Digital Transformation Partner," signaling a full-scale push to discover and expand the B2B DX market based on KT's ABC platform. Following the discovery of successful models in seven major sectors including finance and logistics, KT plans to expand DX business to regions and small and medium-sized enterprises, aiming to create exemplary cases of the Korean New Deal. Additionally, next month, KT will launch the "KT DX Platform," which integrates innovative services such as AI, Big Data, and blockchain.

CEO Koo emphasized, "KT's strategy to leap as a digital platform company and target the B2B market is supported by 'ABC+X' capabilities and experience, which combine network infrastructure superiority and ABC technology with specific industry sectors to create business value," adding, "We will lead innovation in other industries and realize South Korea's 'DX Dream.'"

The global DX market is expected to grow at an average annual rate of 23%, reaching $2.3 trillion (approximately 2,600 trillion KRW) by 2023. According to market research firms such as IDC, only 20% of domestic companies had DX adoption plans last year, but this is expected to expand to 80% by 2023. This is why KT's ambition to become the number one company in the B2B DX market, which holds limitless opportunities, is not seen as a mere declaration.

"We Have Differentiated Capabilities"?The Source of KT's Confidence

CEO Koo cited KT's capabilities as a digital platform operator, highlighting ▲media ▲finance ▲B2B based on ABC as the top strengths.

First is the media platform, including IPTV. CEO Koo explained, "KT is overwhelmingly number one in the media industry. One in four Koreans is affiliated with KT," adding, "Media is the platform that has the greatest influence inside the home." Currently, KT's IPTV subscribers number 8.69 million. Including Skylife and the acquisition of Hyundai HCN, this number expands to 12.56 million.

IPTV is one of the fastest-growing businesses within KT. Including the Hyundai HCN acquisition and OTT service Season, it is a 3 trillion KRW scale business. CEO Koo said, "People ask why we are acquiring cable TV company Hyundai HCN. It is to secure a definite number one position and a solid platform base," adding, "Starting next year, we will fully enter the content business."

The second capability is finance. CEO Koo noted that the K-Bank issue was resolved with BC Card becoming the largest shareholder. He evaluated, "BC Card has 3.1 million merchants based on its customer base," and said, "It has the potential of a data company." He declared, "K-Bank will position itself differently from Kakao Bank," and added, "By combining BC Card, the number one payment platform, with KT, we will create value beyond finance."

Alongside this, CEO Koo also targeted the B2B DX market, emphasizing ABC capabilities for this purpose. Regarding AI and Big Data, the key is not the technology itself but creating business value by combining it with specific fields. CEO Koo said, "KT has access to telecommunications, finance, and consumer data covering 18 million individual customers, 9 million household customers, and 50,000 B2B clients," adding, "We are confident that we can make money with AI and Big Data." For example, in the AI sector, KT plans to enter the AICC (AI Call Center) platform business starting in 2021, explaining that it is a market worth 3 to 4 trillion KRW annually with sufficient potential.

KT is also preparing to launch the "Cloud One Team" (tentative name). CEO Koo emphasized, "People ask who does cloud in Korea, but KT is the number one domestic cloud IDC operator." KT has invested over 2 trillion KRW in this sector for more than 10 years. Next month, KT will open the largest-capacity IDC in Yongsan. He expressed confidence, saying, "Compared to global operators, KT Cloud's competitiveness lies in integrated network services."

Additionally, KT is accelerating its dominance in the service robot market, including patrol robots and companion robots based on AI. In the medical field, KT is building a platform that flexibly responds to surging demand and is entering the AI healthcare business. KT aims to develop a non-face-to-face medical imaging solution called "KT Medical Makers" (tentative name) to support one-on-one remote consultations, remote collaboration among medical staff, and to establish next-generation medical service environments such as home AI healthcare.

[Image source=Yonhap News]

From Next Year, M&A and Structural Changes to Begin in Earnest

Known as a "traditional KT man" and "strategic planning expert," CEO Koo announced aggressive M&A and structural reorganization starting next year, his second year in office. He said, "(Since my inauguration in March) we have resolved long-standing issues such as K-Bank and cable TV acquisitions and strengthened our fundamentals. We have also prepared structural changes," adding, "You will see structural changes next year." This refers to restructuring across the entire group and mergers and acquisitions among affiliates.

Regarding specific plans for M&A or investments, CEO Koo said, "There will definitely be deals in other fields," expressing confidence by stating, "I grew up as an M&A expert and know exactly how to do it." He explained, "The reason I said we have prepared structurally is because of this," and added, "You will see some parts of it next year." KT is also open to additional cable TV acquisitions and equity swaps with other companies.

He also expressed concerns that KT's corporate value is not properly evaluated in the market. However, he criticized other companies' strategies to increase corporate value through spin-offs and listings of subsidiaries. CEO Koo said, "If it weren't for this year's market, it wouldn't work. In a way, it feels like deceiving individual investors," adding, "In that regard, KT will clearly state that we will properly communicate and have our value evaluated, and create a way for investors to trust and invest even when the stock market is not abnormally flooded with money like this year."

CEO Koo Rebutting the Image of "KT as a Non-Growth, Old Company" One by One

CEO Koo actively rebutted concerns and negative images surrounding KT. Regarding criticism that KT's growth rate over the past five years was only 1%, he pointed out, "There are surprisingly growing businesses inside," citing media (20%, based on the last five years), enterprise IT solutions (18%), and AI/DX (8%). He explained, "The overall growth rate is 1% because revenue from landline and international calls decreased by over 1 trillion KRW in five years," calling it an unavoidable mega trend.

He also mentioned KT's image as an old company with an average age of 47. He added, "We have 4,500 employees in their 20s and 30s, 1,500 employees related to ABC, and 420 core AI talents," stating, "If you break it down, we are confident." Regarding core AI talents, KT plans to increase the number by more than 300 annually, expanding to about 1,200 by 2022.

CEO Koo reiterated, "Many people think of KT as a company with no change and no growth. They say KT is just a company that does mobile, internet, and IPTV, so how can it lead innovation in other industries?" but emphasized, "We are sufficiently confident."