KT Boss Goes One Up on KCC Chairman

KT Chairman Lee Suk-chae

Telecom Firm Suspected of Cutting Deal Directly With Finance Ministry for Big Investment Plan

By Kim Tong-hyung
Staff Reporter

The Korea Communications Commission (KCC), the country's converged regulator for broadcasting and telecommunications, is barely two years old, but is already facing an identity crisis.

And the threat is coming from the unlikeliest source ― KT, the country's biggest telephone and Internet provider that the KCC had been touting as the model company for the era of digital convergence.

KCC officials were struggling to answer questions by reporters Thursday after the Ministry of Strategy and Finance announced plans to combine KT and state-run banks in a special purpose entity (SPE) to invest in the network infrastructure for next-generation telecommunications services such as WiBro and Internet protocol television (IPTV).

KCC Chairman Choi See-joong

An SPE is a legal entity owned by one or more organizations that is created to fulfill specific or temporary objectives. These entities are typically used when companies look to isolate themselves from financial risks on large-scale projects.

According to the plans announced by the finance ministry, KT will invest 1 trillion won (about $790 million) in the special purpose company, an amount that will be matched by state-run financial institutions such as the Korea Development Bank or the Industrial Bank of Korea.

The Korean government had been promoting WiBro, a wireless service that is the local variant of mobile WiMAX, and IPTV as the country's new high-tech growth engines. However, the new platforms are struggling to be relevant in a country with saturated mobile and pay-TV markets.

This has companies like KT, the biggest backer for both of the technologies, reluctant to risk investing too much into the unproven services. In reporting the plan to Cheong Wa Dae, the finance ministry claimed that forming an SPE could be a logical solution to the problem.

KCC officials, clearly taken by surprise, seemed to be troubled in making up their minds about the finance ministry's suggestion. Initially, a KCC spokesperson claimed that the regulator wouldn't be opposed to any plans that would help KT and other telecommunications companies to invest in new services.

However, Suh Byung-jo, who heads the KCC convergence policies division, rushed down to the newsroom an hour later to tell reporters that it would be impossible for a private company to profit from a network that is a result of a joint investment with the government.

``The SPE won't have the licenses to operate WiBro or IPTV networks. The current law prevents the government to jointly invest in a communications network than lend it to a private operator,'' Suh said.

``We have been talking extensively with KT on ways to ease the company's burden on communications investment, and allowing the company to gain long-term loans through project financing was one of the suggestions. However, a joint investment with the government in building new networks had never been considered.

The confusion among policymakers was understandable, as KCC seemed to be out of the communication loop. KT chairman Lee Suk-chae didn't discuss the scenario when meeting with KCC chairman Choi See-joong on Wednesday. Choi was only told of the plan just before the finance ministry submitted it to President Lee Myung-bak.

Industry watchers wonder whether the tight relationship between Choi and Lee ― a result of the KCC fast-tracking the approval of KT's merger with its mobile unit, KTF, earlier this year ― has cooled.

In a recent KCC meeting, Choi criticized Lee for ``inappropriate'' comments after the KT chairman wondered in a seminar days earlier whether the KCC committee-based decision-making process makes it less effective as the country's top agency for high-tech policies.

KT officials are denying speculation about a possible rift between the company and the KCC. The company has made no changes to its previous investment plans in WiBro and IPTV, officials said.

``We submitted the idea about the special purpose company to the finance ministry because we were asked to come up with scenarios to help the economy and boost employment,'' said a KT official.

``There is a gap between the idea and what we actually plan to do.''

thkim@koreatimes.co.kr

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