Posted : 2007-11-29 17:59
Updated : 2007-11-29 17:59

KT Leads Telecom Industrys Globalization

By Cho Jin-seo
Staff Reporter

The royal postal agency had to hire Chinese and American engineers to build and operate its first telegram and telephone lines in the late 19th century. Some 12 decades after, its descendant KT is now proudly sending its engineers and exporting technologies to developing countries to help build their communications infrastructure.

Last week, Korea's largest telecom company said that it signed a contract to set up a Mobile WiMax network in Rwanda. The African project is more significant to the company than the money involved in it, KT said. ``It will help heal the war-torn nation, and will be the cornerstone for our African businesses,'' a KT public relations official said.

The announcement was the latest evidence of KT's dedication to globalization. Last month, the firm acquired East Telecom, an Uzbekistan Internet service company, to start broadband and wireless Internet services in the Central Asian region. The Uzbek firm became the seventh foreign company fully or partly owned by KT after ones in Japan, the United States, China, the Philippines and Mongolia.

In its 122 years of history including the first 112 years as a government agency, KT had mostly been a domestic entity. There was little need for it to look outside, because the telephone and later the Internet line businesses created stable and sizable profits, thanks to its vigorous activities as well as the government's legal support.

The situation began to change in the 1990s. The domestic telecom market became virtually saturated as most houses and offices were connected to telephone and broadband lines, and KT's revenue growth slowed. Over the past few years, its annual revenue has hovered around 11.8 trillion won.

The new media business, such as the Internet Protocol TV (IPTV), began to receive the spotlight as the firm's next growth engine. At the same time, it started to take foreign markets more seriously, with CEO Nam Joong-soo leading the charge by himself.

In July, Nam visited the Russian Far-Eastern port city of Vladivostok and celebrated achieving one million subscribers to NTC, KT's Russian subsidiary. KT acquired 80 percent of NTC shares in 1997. KT turned the Russian firm to profit in just three years, and shifted its focus from the wired to the wireless business. Vladivostok has a large Korean population because of its historical and geographical proximity to Korea.

In only five years since the launching of its GSM (global standard for mobile) network in 2001, NTC became the region's No. 1 operator of telecom service, beating out local players such as MTS and Megaphone. What was more encouraging was that its operating profit margin was a whopping 34 percent.

``Reaching the one million milestone proves that Korean telecom firms' management, marketing and customer service strategies won over local customers,'' Nam said.

Along with the military, energy and transportation sectors, the telecom industry is usually heavily protected as a national asset by governments and therefore tends to be dominated by local companies. KT's success in Vladivostok was a unique case in the Korean telecom firms' globalization efforts. For example, SK Telecom, the largest wireless firm, has been trying to expand in the United States via a joint venture but has been struggling with losses.

Enthralled by the Russian success, KT sped up its foreign businesses, especially in the former Soviet Union region. In October, it purchased 51 percent of East Telecom in Uzbekistan at an undisclosed price. It also bought a 60-percent stake in Super-iMax, which has the right to use the radio frequency for the Mobile WiMax wireless Internet service in the former member of the Soviet Union.

KT's CEO Nam is confident that KT and other Korean telecom firms can compete well in other countries, because they are so well-trained in Korea where the competition is the most intensive and the technology is the most advanced.

``I have visited CIS countries and met their business leaders to find new profit sources. I believe that if we utilize our ability to provide customer-oriented services, we can make a second and third NTC, as many as we want,'' he said.

Such strategies should be accompanied by advanced, reliable and commercially affordable technologies, and KT is confident that its Mobile WiMax, aka WiBro, system will appeal foreign governments.

Mobile WiMax allows high-speed access to the Internet even in a fast-moving car, by covering entire cities with wireless connections _ a big advantage for countries that lack a wired telecom network. It has been chosen as one of the international standards for third-generation mobile telecommunication technologies, which are known as 3G. KT, as well as Samsung Electronics, is one of the leading proponents of the platform.

KT CEO Nam Joong-soo shakes hands with the 1 millionth subscriber to NTC's mobile phone service in July in Vladivostok. KT's Russian subsidiary has become the largest mobile operator in the Primorsky Krai, the Far Eastern region of Russia. / Courtesy of KT
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