By Kim Yoo-chul
KT Chairman Lee Suk-chae, head of the nation’s largest fixed-line operator, has declared a state of emergency management to boost efficacy and strengthen the firm’s challenge in the competitive race in fourth-generation (4G) long-term evolution (LTE) services.
This is the first time that the CEO has directly used the word, emergency. KT executives agreed to cut their annual paychecks by 10 percent, if the company fails to meet its management target.
Lee plans to put the corporate focus on strengthening its capability to deliver virtual goods, such as content and applications.
``This year, KT has a lot of work to do. We expect annual investment to rise by more than 20 percent by 2012. It’s required to boost management efficacy to raise cash for our key projects,’’ Lee said Monday.
He made the comments at a ceremony marking the start of his second term at KT’s main office in downtown Seoul.
``KT has managed to save over 500 billion won in costs. But our desperate efforts will be short-lived with the government’s consistent pressure to cut mobile rates,’’ Lee said.
``KT plans to prepare the money we need on our own. There’s no reason to implement restructuring projects if we don’t see any problems.’’
For the fourth quarter, the company saw a 16.7 percent drop in operating profit from a year ago in what analysts say is due to a rise in marketing costs.
Despite a decision to raise spending for marketing to avoid losing customers to rivals such as SK Telecom and even the nation’s smallest mobile carrier LG Uplus that began 4G LTE services earlier, KT has scrapped its goal of attracting 4 million 4G LTE customers by the end of this year.
``That’s true. KT was late in offering LTE services. But we aren’t in a critical phase as our bottom line in terms of overall customers is still safe,’’ Lee told reporters.
SK Telecom and LG Uplus began LTE services in Seoul in July, and KT followed after a court had blocked its plan to use its 2G networks for the next-generation service.
Over requests to unveil more details to recover the sagging momentum for 4G LTE customers, the CEO said KT has high hopes for its cloud communication center technology. He expects the company to draw more LTE customers from next month.
Lee also reaffirmed his firm stance towards television makers to pay for its broadband service. Smart TV is the top word for major television makers such as Samsung and LG that market Web-connected TVs to stay profitable in a highly-competitive market.
``Smart TVs should connect to networks. Without that, then they are just expensive TVs. There are no free lunches. I believe set makers will pay telecom companies in return for using their networks,’’ said Lee.
KT previously blocked Internet access to Samsung’s Web-based televisions as it believed they slowed down overall network speed, a move that threatened to stall sales of models Samsung is relying on to keep it profitable.
KT resumed the service after Samsung Electronics decided to negotiate with that issue. A Samsung spokesman reiterated it doesn’t have any plan to pay for its sets connecting to the Internet.
During the conference, KT said it is aiming to create annual revenue of 40 trillion won by 2015. ``We will focus on creating synergy with our global business partners,’’ said Lee without elaborating further.
``KT will aggressively tap overseas markets to effectively fight falling voice call revenue,’’ the chairman told reporters.
Telecommunications is the latest industry to face government scrutiny as Korea grapples with persistently high consumer prices.
Oil refiners previously lowered gasoline and other oil product prices following government pressure, while the nation has also cut import tariffs on consumer staples such as pork and milk.
``Average revenue per user (ARPU) for mobile carriers has declined continuously. Despite this, customers still insist that mobile rates are high and I believe that’s because of higher handset prices by phone manufacturers,’’ Lee said.