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KT Smiles as Copper Prices Rise... Thanks to 350,000 Tons of Underground Idle Assets

KT Smiles as Copper Prices Rise... Thanks to 350,000 Tons of Underground Idle Assets

[Asia Economy Reporter Lim Hye-seon] Copper prices are soaring. Which companies benefit the most when copper prices rise? Copper wire manufacturers like LS Cable & System and Poongsan? No. Ironically, it is the telecommunications company KT.


KT laid copper communication lines nationwide in the past for telephone and internet use. Through asset revaluation in 2011, KT discovered that there were 450,000 tons of idle copper wire buried underground. During the tenure of former KT Chairman Lee Seok-chae, KT monetized these idle copper wires by selling them as assets. For example, between 2012 and 2013, about 100 billion KRW worth of idle copper wire was sold. It is estimated that currently, 350,000 tons of copper wire remain buried underground. In other words, KT essentially owns a copper mine.


International copper prices, which had fallen to 7,000 USD per ton last July, surpassed 9,000 USD per ton at one point during trading on the London Metal Exchange on the 11th (local time). At 9,000 USD per ton, the asset value of KT’s idle copper wire reaches 4 trillion KRW. Compared to last July, the valuation has increased by about 800 billion KRW.


Goldman Sachs Group forecasts that copper prices will exceed 11,500 USD per ton within the year. If copper prices reach 11,500 USD per ton, the asset value of KT’s idle copper wire will exceed 5 trillion KRW. This means KT could earn 1 trillion KRW from the copper price increase within the year. Securities firms estimate KT’s operating profit last year at around 1.85 trillion KRW. In other words, the rise in copper prices this year could yield greater profits than last year’s operating profit.


As of June last year, KT’s asset status shows that the book value of structures, machinery, line facilities, and right-of-use assets totaled 9.68 trillion KRW. Idle copper wire is included in line facilities. Currently, KT does not conduct asset valuation for idle copper wire. Although additional profits were gained from selling copper wire for several years since 2012, KT explains that this practice has now been suspended.


Copper communication lines were once important assets for KT, but they have become idle assets as KT switches to optical cables. Optical cables are made of optical fibers for data transmission. Using lasers for communication, they enable long-distance high-speed communication incomparable to copper wires.


A securities industry insider said, "KT is an undervalued company relative to its asset value," adding, "On the surface, the price-to-book ratio is about 0.5 times, but this is based on book value, and the actual value of assets such as real estate and copper held is much higher than the book value."


KT Smiles as Copper Prices Rise... Thanks to 350,000 Tons of Underground Idle Assets


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