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| Pantech CEO Lee Joon-woo, center, bows his head with the company's vice presidents during a press conference to appeal for aid to resuscitate the firm at its office in Sangam-dong, western Seoul, Thursday. / Yonhap |
By Kim Yoo-chul
Pantech is on the verge of going under because local carriers and other creditors are refusing to extend a lifeline for the nation's smallest local handset vendor.
Pantech's future is in the hands of SK Telecom, KT and LG Uplus as the mobile carriers have a combined 180 billion won worth of receivable accounts owed by the company.
Unless the three carriers participate in the debt-for-equity swap rescue program led by Pantech creditors, the company will not be able to survive.
"SK Telecom is negative about the outlook of Pantech. For the time being, it's highly unlikely that we can change our stance towards the handset manufacturer. We've already prepared for an exit strategy," said an SK Telecom official, asking not to be named.
The official said that considering Pantech's weak business portfolio, there's no guarantee that any future financial support would revive the company.
SK Telecom owns the largest amount of Pantech's debt ― 90 billion won in accounts receivable, followed by KT and LG Uplus with 45 billion won each.
Pantech creditors extended their final decision on whether to continue a court receivership or terminate it on July 14 when the 180 billion won debt matures.
Pantech creditors led by Korea Development Bank with eight other local banks earlier decided to turn 480 billion won of loans into capital to save the smallest handset supplier but with a condition that the mobile carriers join the program.
The local carriers were being approached by senior executives of Pantech's creditor banks who asked them to support the program. But the talks remain stalled without breakthroughs.
Challenging market
According to officials at the carriers, Pantech's future is in serious doubt as previous cash-intensive marketing campaigns to promote its Vega-branded products from tablets to smartphones failed to impress the carriers by all measures.
As new order prevails in the smartphone market focusing on less-pricey budget models, major handset manufacturers are pushing to cut the prices of their mobile devices to keep their customers purchasing existing brands.
Pantech's local market share stays below 8 percent. It tried to sell the Vega to leading carriers in the United States to offset the impact of falling profitability in the local market.
But it didn't work.
"If the carriers join the rescue plan, then they will have to invest in Pantech continuously. That's a huge burden," said an official at LG Uplus.
He said about 700,000 Pantech products were stockpiled in warehouses by the carriers.
"Pantech isn't in a position to keep its inventories low according to market demands. Because Pantech is in financial troubles, one-time cash support for it isn't enough," said the official.
Pantech officials said a departure by the carriers for the capital-increase plan will mean that the local handset market will be shared by Samsung Electronics and LG Electronics.
Pantech's collapse is expected to benefit LG which is desperate to increase its market share.
Pantech graduated from a workout program in late 2011 which had begun in 2007.
Samsung Electronics and U.S.-based chip giant Qualcomm are also paying more attention as they have stakes in the vendor. Samsung and Qualcomm each have a 10 percent stake.
Samsung Electronics officials declined to comment on the issue.
However, it's fair to say that Samsung also prepared the exit strategy because Samsung's smartphone business is also at a risk amid growing challenges from budget Chinese smartphone vendors.
Pantech had been approached by several foreign handset manufacturers including Indian smartphone maker Micromax and China's Lenovo.
But no actual deals have come to fruition as the bidders worried about Pantech's weak financial soundness and market position.
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