Organizational Restructuring Within the Year as Starting Point
Speeding Up 탈통신 and DX
Spin-off → Investment → IPO Route
Focus on Enhancing Corporate Value to Boost Stock Price
Attention on Physical Division and Holding Company Conversion
[Asia Economy Reporter Koo Chae-eun] KT is undertaking a major organizational restructuring as it enters the second year under CEO Koo Kyu-mo's leadership. Significant 'change and renewal' are expected, including group-wide restructuring (business structure reorganization), subsidiary spin-offs and listings, and physical division of the wired business sector. Given the CEO's strong determination to put KT's undervalued worth back on track, it is anticipated that the scope of restructuring to be undertaken will be considerable.
According to sources inside and outside KT on the 8th, KT is expected to finalize the performance evaluation process this week and begin promotions and organizational restructuring as early as next week. KT typically conducts executive personnel changes, announces new year organizational restructuring plans, and carries out affiliate personnel changes from late December through January. It is reported that some executives have already been notified of reappointment, indicating that the organizational restructuring and personnel plans have taken shape to some extent.
Focus on Digital Transformation and 탈통신 (Detelecommunication)
The key point in this organizational restructuring is the change in the structure of the digital transformation organization. Since CEO Koo has repeatedly emphasized the transition to a 'digital platform company (Digico)' through 탈통신 (detelcommunication) and strengthening the B2B business segment, the influence of related organizations is expected to grow.
KT is putting its life on the B2B business. Leading with the new B2B brand 'KT Enterprise,' KT is focusing its capabilities on the ABC platform (Artificial Intelligence (AI), Big Data, Cloud) with the ambition to become the number one company in the DX (Digital Transformation) market. KT has also set a goal to increase the non-telecom portion, which currently accounts for 35% of sales, to 50% by 2025. For this reason, there are expectations inside and outside KT that the AI/DX convergence business division may expand overall.
Will Profitable New Businesses Spin Off?
There is also a growing possibility of launching a 'new setup' by spinning off new business divisions and listing them. At a press briefing last October, CEO Koo stated, "We will concretize the value enhancement method through subsidiary spin-offs and listings starting next year," and added, "We should be able to see the plan for spin-offs by next year."
The path of 'subsidiary spin-off → investment attraction → Initial Public Offering (IPO)' is a common value-up method in the ICT industry. During the investment attraction process, corporate value increases, and when the listing is completed, the value of the parent company holding those shares also rises. Candidates expected to follow this path include K-Bank, which announced an IPO plan by 2023, as well as BC Card, KT Estate, and the B2B business division. The subsidiary listing plan is expected to become clearer in KT's year-end and early-year organizational restructuring. The securities industry believes KT should streamline overlapping organizations and clarify the responsible entities for new businesses to receive a favorable Price-to-Earnings Ratio (PER).
Key Issue: Transition to Intermediate Holding Company
There is also interest in the possibility of KT restructuring its governance, including transitioning to an intermediate holding company. The core idea is to split traditional business sectors such as wired, wireless, and media, and develop new businesses into individual specialized subsidiaries or business-type holding companies.
However, there are considerable concerns that governance restructuring may not be easy in reality due to opposition from labor unions. During former KT Chairman Hwang Chang-gyu's tenure, there were demands for intermediate holding company transition and physical division, but these efforts lost momentum due to union resistance. Even if group restructuring proceeds, it is expected that KT will prioritize subsidiary listings over holding company transition. Kim Hong-sik, a researcher at Hana Financial Investment, commented, "If governance restructuring proceeds, cost savings can improve profitability in the wired sector, but given the significant opposition from the wired business division and labor unions, it requires further observation."
It also seems inevitable that KT will undertake the reorganization of affiliates that are unlikely to generate synergy. KT's Chief Financial Officer Yoon Kyung-geun stated during the third-quarter conference call, "We plan to boldly reorganize group companies that lack growth and synergy." Among KT affiliates, the sale of KT Submarine and KT Telecop has been consistently suggested. KT has also started reorganizing its overseas subsidiaries since early this year.
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