KT Koo Geon-mo's Reappointment Prospects in Focus... Stock Boost Achievements and Split Sponsorship Risks

KT CEO Koo Hyun-mo Expresses Intent to Renew Term
KT Board to Conduct Preliminary Review
Candidate Screening Committee to Confirm One Candidate Before Regular General Meeting Vote

Koo Hyun-mo, CEO of KT

[Asia Economy Reporter Cha Min-young] As KT CEO Koo Hyun-mo approaches the end of his three-year term, he has expressed his intention to seek reappointment, prompting KT's board of directors to plan a priority review for his renewal. While Koo is credited with successfully boosting the stock price through digital transformation efforts during his tenure, he also faces risks related to the 'split sponsorship' scandal, making it difficult to predict his chances of reappointment.

KT is scheduled to hold a board meeting on the 9th to conduct a priority review regarding Koo Hyun-mo's reappointment. Following Koo's expression of intent to renew his term, a CEO candidate screening committee will be formed to carry out the priority review.

The board will finalize one candidate through the screening committee, recommend the candidate to the shareholders' meeting, and complete the CEO appointment through a vote at the regular shareholders' meeting in March next year. Candidate qualifications are known to include evaluations of various attributes such as career, academic degrees, past management performance, expertise, and experience. According to KT's bylaws, the candidate must be decided at least three months before the regular shareholders' meeting in March next year, so the process is expected to proceed swiftly.

Although opinions on Koo Hyun-mo's reappointment prospects are divided, his management performance is positive. KT's consolidated sales for the third quarter this year reached KRW 6.4772 trillion, surpassing the FnGuide consensus of KRW 6.4279 trillion. Operating profit for the same period was KRW 452.9 billion, about KRW 10 billion above consensus. This was driven by a steady increase in 5G subscribers, now accounting for 57%, alongside ongoing demand in digital transformation (DX), cloud, internet data center (IDC), and media sectors. Leading with KT Studio Genie, KT completed the media and content value chain, shedding the stigma that 'telecom companies are weak in content' and achieving success with the drama "Extraordinary Attorney Woo."

The issue of undervaluation of corporate value, which was a concern immediately after Koo's appointment, has also been partially resolved. As of the 8th, KT's stock price closed at KRW 36,500, an 85% increase compared to KRW 19,700 at the time of his appointment on March 30, 2020. KT's market capitalization surpassed KRW 10 trillion for the first time in over nine years since 2013 in August. This contrasts with the downward trend in stock prices of other KOSPI-listed companies, including telecom competitors, during the same period. In the securities industry, there are even assessments that Koo's failure to secure reappointment could pose a short-term risk. Jeong Ji-soo, a researcher at Meritz Securities, said, "If CEO Koo Hyun-mo fails to be reappointed, it would be negative for KT's stock price," adding, "Conversely, if reappointed, shareholders can expect the continuation of dividend policies valid until 2022 and shareholder return policies such as share buybacks." The market responded favorably to Koo's announcement of his intention to renew. On the morning of the same day, KT's stock price traded at KRW 37,700, up KRW 1,200 (3.2%) from the previous closing price of KRW 36,500.

Koo was also reappointed as a board member of the Global System for Mobile Communications Association (GSMA). The GSMA board is the highest decision-making body in the mobile telecommunications industry, composed of CEO-level executives from over 800 telecom companies worldwide. The board includes global telecom companies such as AT&T, Verizon, Vodafone Group, and Telef?nica. Koo will serve as a board member until 2024.

On the other hand, risks remain. This is due to the possibility of Koo violating the Political Funds Act related to the so-called split sponsorship scandal. Employees involved were indicted without detention on charges of illegally sponsoring 99 lawmakers from the 19th and 20th National Assembly sessions by creating slush funds through 'gift certificate laundering'?purchasing gift certificates with company funds and reselling them for cash. Koo received a summary order from the court imposing a fine of KRW 15 million but is appealing and currently undergoing a first trial. KT's legal counsel argues that the Political Funds Act, which punishes political donations by corporations and organizations, is unconstitutional and claims innocence. There is also the possibility of opposition from the National Pension Service. In fact, the National Pension Service previously blocked the appointment of Park Jong-wook, head of the management division, as an inside director.