Is Telecom Giant KT Too Big for Its Own Good?
Company Hit With Subscription Ban While Searching for Growth Engine
By Kim Tong-hyung
Staff Reporter
It has been a year full of blunders for telecommunication giant, KT, whose every step has been a painful one.
The company has been struggling to sustain growth in a saturated domestic market with dropping mobile rates and Internet telephony increasingly eroding its profit base.
Now with the Korean Communication Commission (KCC), the country's telecommunications and broadcasting regulator, hitting KT with a 30-day business ban for illegal marketing practices, the company is liable to lose more customers.
The KCC, which imposed a 25-day suspension on rival broadband operator, LG Powercomm, for similar violations, has been tightening its control over unlawful promotional activities as Internet operators had been providing personal information of their subscribers to telemarketing firms without their consent.
Hanarotelecom, the No. 2 fixed-line and broadband carrier that was acquired by wireless leader, SK Telecom, in February, took the first hit, just recently returning from a 40-day suspension imposed at the start of July.
Industry insiders believe that KT has it worse among the three broadband carriers with its suspension, starting at the month's end, rendering the company helpless in the fall high-demand season.
As KT controls more than 90 percent of the country's fixed-line telephony customers and nearly 45 percent of broadband subscribers, it certainly has the most to lose.
``KT is definitely taking it hard and has been complaining that the length of the suspension is excessive," said Lee Ki-ju, a KCC director.
``However, as regulators, we needed to show consistency in discouraging telecom carriers from abusing their subscriber information, which they were obviously mismanaging. The drawback is that consumers will be compromised in their choices for some time, but that is the cost for righting the unlawful marketing practices that continued for such a long time," he said.
KT had expected 2008 to be the year when the company took a significant leap forward, shaking off years of slow growth and building a foundation for the future by pushing next-generation services such as WiBro and Internet protocol television (IPTV) services. The company had also moved quickly to merge with its mobile affiliate, KTF, the country's No. 2 wireless carrier.
The strengthened partnership with KTF was supposed to allow KT to grab a larger share of the telecom market where fixed-line carriers have been grouping with their wireless partners and competing to provide bundled packages of broadband and wireless services at discounted rates.
However, the company is now poised to lose customers to the Hanarotelecom-SK Telecom partnership that is eager to make up for a lost July.
And bundled services aren't proving to be much of a hit with consumers anyway. Already having signed complicated contracts for wireless services, which provide a wide range of discounts among family members and friends, and subscribing to broadband services on discounts, few are rushing to sign for packaged deals at lower basic rates.
The Hanarotelecom and SK Telecom partnership has gathered 20,850 customers for their bundled services so far, while the LG Powercomm and LG Telecom partnership has some 25,000.
KT-KTF, which had been considered the most advantageous pairing, has just 60,000 customers for its bundled packages.
With the company struggling to gather customers for its WiBro wireless broadband services and the projections for the IPTV market uncertain, securing new growth remains elusive for KT.