[Company Insight] Korea Information & Communication, Where Does Chairman Park Heon-seo's High Interest Come From?

The domestic simple payment service market is rapidly growing. DB Financial Investment estimated the total usage amount of simple payment services in the first half of this year to be 130.9 trillion KRW using data on the usage status of electronic payment services from the Bank of Korea. This is a 29.4% increase compared to the same period last year. Recently, with the easing of social distancing, the growth rate of simple payment amounts by smartphone manufacturers, including Samsung Pay, was the highest. Simple payments using smartphones are becoming familiar. This is why it is expected that Apple Pay will quickly settle in the market upon its domestic introduction. Asia Economy reviews the business structure and status of Korea Information & Communications and NICE Information & Communications, which have attracted attention due to expectations for the introduction of Apple Pay, and gauges their future growth potential.

[Asia Economy Reporter Jang Hyowon] Korea Information & Communications, a value-added network (VAN) operator, has attracted attention with the news of Apple Pay's domestic introduction. Korea Information & Communications shows stable performance but is analyzed to be hindered by a complex ownership structure and transactions with the owner company.

Experience Expanding Business Through Services for Foreigners

Korea Information & Communications is an online and offline payment agency service company that entered the financial payment market by developing the country's first credit card inquiry service business. Its main businesses include value-added network (VAN) services targeting credit card merchants and online operators, and electronic payment agency (PG) services. It owns brands such as EasyCheck, EasyPOS, and EasyPay.

Additionally, with the purpose of supporting unlisted venture companies with high technological capability and growth potential, it also operates a small and medium enterprise startup investment business in the form of unsecured equity investment. From this year, it has spun off its enterprise resource planning (ERP) division to establish a new company, EasyShop, strengthening the ERP sector.

Korea Information & Communications operates services targeting foreign tourists to differentiate itself from competitors. These include the domestic tax refund service (TRS) for foreign tourists and the Alipay barcode simple payment service exclusively for Chinese customers.

Most of Korea Information & Communications' revenue comes from services such as VAN and PG. As of the end of the first half of this year, 95% of total revenue was generated from financial VAN services. Sales from credit card terminal devices accounted for about 4%. The startup investment and ERP services accounted for approximately 0.5% and 0.2%, respectively.

In the first half of this year, Korea Information & Communications recorded sales of 282.5 billion KRW and operating profit of 13.4 billion KRW. Compared to the same period last year, sales increased by 6.56%, while operating profit decreased by 17.5%. On an annual basis, Korea Information & Communications' sales have shown steady growth and operating profit remains stable. It is expected that related sales will increase when Apple Pay is introduced domestically in the future.

Complex Ownership Structure... High Salaries Paid to Affiliates

Korea Information & Communications has a high shareholding ratio among major shareholders, with only 10% of shares available for public trading. Currently, the largest shareholder is the Swiss investment company DE WEY&CIE SA, holding 26.58% of shares. Primax Management, Inc. holds 21.2%, and ONE SWISS BANK SA holds 13.67%.

Founder Park Heon-seo is the second-largest shareholder with 21.54%. DE WEY and ONE SWISS BANK shares are under voting rights delegation agreements with Chairman Park, and Primax is a company 100% owned by Park's son, Stephen C. Park, Executive Director of Korea Information & Communications, so control remains strong.

Additionally, 'Korea Information & Communications Service,' a company where Chairman Park is the largest shareholder, holds 2.74% of Korea Information & Communications shares, securing a total of 85.72%. Excluding treasury shares of 3.91%, the actual floating stock is about 10%.

However, most of Chairman Park's personal shares are pledged as collateral for loans, so if the stock price fluctuates significantly or interest payments become problematic, forced sales may occur. Chairman Park is estimated to spend about 2.1 billion KRW annually on interest for stock-collateralized loans.

Chairman Park is understood to partially cover the interest through salaries from Korea Information & Communications and its affiliates. Last year, he received a total of 1.2375 billion KRW, including 900 million KRW in salary and bonuses from Korea Information & Communications. From this year, his base salary was set at 1.2 billion KRW, receiving 100 million KRW monthly.

Chairman Park is also estimated to receive a large annual salary from Korea Information & Communications Service. Korea Information & Communications Service is a distribution company supplying card terminals and others to Korea Information & Communications. It recorded sales of 23.2 billion KRW last year, most of which came from Korea Information & Communications.

Korea Information & Communications Service has six employees. President Im Myung-soo of Korea Information & Communications is the CEO, with two inside directors including Executive Director Min Doo-sik and one auditor. Chairman Park is also an employee of this company. Korea Information & Communications Service spent 2.4 billion KRW on salaries last year. Simply calculated, each employee received about 400 million KRW. Salaries paid were 2.3 billion KRW in 2020, 2.5 billion KRW in 2019, and 2.6 billion KRW in 2018.

A Korea Information & Communications official stated, "Korea Information & Communications Service is not just a simple distributor but handles terminal inspection, inventory management, logistics, and pays salaries to skilled employees related to these tasks."