[Q&A] KT Ku Hyun-mo: "From Telecommunications to Digital Platform Company, No Decision on Name Change Yet"

[Image source=Yonhap News]

[Asia Economy Reporter Joselgina] KT CEO Koo Hyun-mo on the 28th drew a line on the possibility of changing the company name due to the business structure shift from a telecommunications company to a digital platform company, saying "Not yet."

At the 'Digital-X Summit 2020' held at the Grand Intercontinental Seoul on the same day, CEO Koo said, "KT is an old asset and has advantages," adding, "I hope the interpretation of 'T' can be given as something better than Telecom, such as Technology."

KT aims to transform into a digital platform company by leveraging platforms based on so-called 'ABC'?Artificial Intelligence (AI), Big Data, and Cloud?and plans to become the number one player in the B2B digital transformation (DX) market in the future.

CEO Koo presented that by 2025, based on growth in TV and enterprise DX platforms, the ratio of telecommunications to non-telecommunications will be targeted at "5 to 5," with "total sales aiming for about 20 trillion won."

He also said, "I grew as an M&A expert within the company. Structural changes can be seen in several areas by next year," hinting at aggressive M&A and restructuring starting from his second year in office next year. Regarding corporate partnerships through share swaps, he said, "We are open to it, but it must be strategically fitting," and mentioned, "Our focus is on digital transformation (DX), content, finance, healthcare, robotics, and other fields."

Below is a Q&A with CEO Koo.

- This is your first official briefing seven months after taking office. What changes have occurred since your inauguration?

▲ (CEO Koo Hyun-mo) I had three thoughts after taking office. I wanted to solve long-standing tasks. One long-standing task was the capital increase issue of K-Bank. The capital increase had been stagnant for the past 3-4 years, which was a big challenge for the group, but it has been resolved. BC Card became the largest shareholder of K-Bank, and the capital increase was completed. Another task was the acquisition of cable TV. Being number one in the media business is important. After doing business, I realized that number one and number two are different. We must be overwhelmingly number one in the media sector. Recently, after signing the acquisition contract for Hyundai HCN, we are awaiting government approval.

The second is to strengthen internal capabilities. We decided to determine how and in which areas to grow, enhance capabilities including personnel, and change the way we work. We highlighted KT’s growth areas. We have also prepared for new growth sectors, and on a smaller scale, we established organizations such as the robotics business unit and digital buyer health sector.

The third is to prepare for structural changes. We prepared for group-wide restructuring and consolidation of affiliates. Visible results can be expected around next year. Regarding the joint investment in 5G networks in rural areas by the three telecom companies, KT proposed it first and is actively discussing it. KT is leading the biggest structural change in the history of the telecommunications industry. Until now, it was competition. Now, through cooperation rather than competition, we can provide benefits to the public.

- What are the future targets for the proportion and amount of non-telecommunications revenue?

▲ Currently, KT’s wired and wireless telecommunications revenue is about 10 trillion won. Mobile, internet, dedicated lines, and landlines are telecommunications. Media is a platform business, not telecommunications. Enterprise messaging is also not considered telecommunications. Adding energy and security, it totals 5 trillion won. The ratio is 2:1. Mobile growth is difficult. Growth will come from TV and enterprise DX platforms. By 2025, the goal is to have a roughly 5 to 5 ratio between telecommunications and non-telecommunications. Total sales target is about 20 trillion won.

- Dilive, CMB, and other additional assets are on the market. Are there acquisition plans?

▲ (Kang Guk-hyun, Head of Customer Division) If there is synergy with KT and growth potential, we can fully consider it.

- Recently, share swap corporate partnerships have been increasing, such as Naver with CJ, SK Telecom with Kakao. What are KT’s plans?

▲ Of course, we are fully open to partnerships including share swaps. However, it must be a strategic 'fit.' Our focus areas are digital transformation, content, finance, healthcare, and robotics. If it fits in these areas, it is possible.

- What about M&A in other sectors?

▲ There will definitely be deals in other sectors. I grew as an M&A expert within the company and know how to handle this area. The reason I said we have prepared structurally is because of this. You will see some parts next year.

- Possibility of investment in TVING?

▲ (Kang Guk-hyun, Head of Customer Division) We will intensify the content business starting next year. KT owns its own OTT, Season, but to compete with global OTTs, we will steadily strengthen cooperation with native OTTs.

- You emphasized a major transformation into a digital platform company. Are there plans to change the meaning of the company name KT?

▲ There was an opinion that we should remove 'Telecom.' That’s why we added 'Enterprise' beside it. But it is not yet time to change the company name. KT is an old asset and has advantages. I hope the interpretation of 'T' can later be given as Technology or some other better word rather than Telecom.

▲ (Kang Guk-hyun, Head of Customer Division) When going abroad, the brand is KT. KT is KT. The 'T' can be used in various ways.

- What are the plans to enhance corporate value and stock price? Other companies sometimes spin off or list affiliates to boost corporate value.

▲ The biggest concern in the second half of the year was that stock price, i.e., corporate value, was not well reflected in the market. But I think this year’s stock market was somewhat unusual. Market liquidity expanded, and the structure inevitably led to a focus on the stock market. Especially, growth stocks were concentrated on, causing excessive distortion. Companies like KT, SK Telecom, and banks, which are considered to have traditional businesses, did not have their corporate value properly reflected.

(Raising corporate value through spin-offs or listings) would not work in a market like this year’s; in a way, I think it deceives individual investors. In that sense, KT will clearly state that we will create a way for investors to trust and invest, where the value we have is properly conveyed and evaluated, even if the stock market does not abnormally attract money like this year.

- What are the specific plans for launching the Cloud One Team?

▲ (Jeon Hong-beom, Head of AI/DX Convergence Business Division) It is still being planned. We will be able to officially announce the launch soon.