By Cho Jin-seo
Staff Reporter
KT, the largest telephone and Internet service provider, said Tuesday that it is considering merging with its mobile phone subsidiary KTF.
The company's CEO Nam Joong-soo said that the firm is weighing various options for restructuring, including a holding company scheme and a merger with the second largest mobile operator.
``We began in depth discussions about various possibilities, whether it would be a holding company system or a merger,'' Nam said in a press conference held at the Seoul Press Club. ``The point is whether we can improve our customer value and the KT Group.''
KT's stock price soared 7.4 percent, Tuesday, and KTF's shares rose 3.2 percent on the news.
KT has a 52.19 percent stake in KTF. If the two merge, the resulting firm will be a telecommunications giant with both mobile and fixed-line networks.
Amalgamation between different telecommunications services has become a trend in the industry these days, as the government promised to ease regulations. SK Telecom, the No. 1 mobile operator, is waiting for the government's approval on the purchase of Hanarotelecom, the second largest telephone and Internet service company. LG Group is also planning to supervise its subsidiaries LG Telecom, LG Powercom and LG Dacom to create synergy.
The telecom industry is tightly regulated by the government as critical national infrastructure. But KT expects the government will have no other choice but to permit the merger, as it has already given favors to SK Telecom.
SK Telecom has been a target of jealousy from other mobile firms as it was granted the right to use the 800-Mhz bandwidth by the government. The 800-Mhz band is more cost-efficient than 1.8 Ghz bandwidth used by the two other mobile firms.
``Our CEO may be too gentlemanly to say this, but I will. Korea is the only country where one company is monopolizing the 800-Mhz band,'' said Suh Jeong-soo, senior executive vice president who is in charge of the corporate strategy office. ``Now, that company (SK Telecom) is going to acquire a fixed-line operator. Compared to that, our merger is not a big deal. The remaining issue is our decision.''
Nam also expects that new, cutting-edge services such as Mobile WiMax wireless Internet and Internet Protocol TV (IPTV) will bring in money next year. He said the firm's annual sales will exceed 12 trillion won for the first time next year.
``As you may know, we tried many things but our sales have remained under 12 trillion won for six years,'' he said. ``The sales target of 12 trillion won may look like a small goal, but it isn't. If you become a KT CEO, you will realize how hard it is to maintain sales of over 11 trillion won. We shall not be proud of it, but we know we did quite well in doing so.''
Nam said the firm's annual investment will increase to 2.6 trillion won, up 200 billion won from this year. However, Suh, the chief strategist, said that the firm may spend less on building expensive Internet networks after 2008.
``Investing 2.6 trillion won is an overloading amount of money considering our annual sales,'' he said. ``My personal opinion is that we should stop spending this right now.''