By Lee Min-hyung
KT share prices continue to plunge this month, as the scandal-tainted mobile carrier is facing a growing public backlash. The uproar is in reaction to top management being involved in the nation’s worst-ever corruption scandal surrounding President Park Geun-hye and her shadowy confidant Choi Soon-sil.
KT stock closed at 30,100 won ($25.56) Friday, plummeting more than 8 percent from 33,000 won on Nov. 1.
The latest scandal has halted its upward momentum on the Seoul bourse, backed by its earnings surprise in the third quarter and a series of achievements in such areas as fifth-generation (5G) network services, according to observers.
The company reported a 401.6 billion won operating profit in the third-quarter, up 17 percent from a year ago. This was the first time in five years that the firm topped 400 billion won in earnings for two consecutive quarters.
But it started to lose its luster this month, with its vice president surnamed Lee summoned for questioning over his alleged involvement with Park’s close aides. Amid the mounting pressure, Lee finally offered to resign Nov. 15 and KT immediately accepted it.
At that time, Lee expressed his regret that snowballing allegations surrounding him have tarnished the firm’s brand. He was suspected of unfairly peddling influence to sign advertising contracts with a public relations company, Playground Communications, run by visual artist Cha Eun-taek who is directly linked with the corruption scandal.
Earlier this month, the prosecution summoned former presidential secretary An Chong-bum for questioning over his alleged influence peddling to nominate Lee as KT’s senior vice president.
“Choi and An abused their power to help Lee and his acquaintance surnamed Shin take high-ranking posts at KT, forcing them to unfairly sign seven advertising contracts worth 6.8 billion with Playground Communications,” the prosecution said last week.
Analysts voiced concerns over the negative sentiment following KT’s involvement in the scandal.
Hana Financial Investment analyst Kim Hong-sik said in a report that the firm is in a state of uncertainty due to a potential reshuffle of its top management including CEO Hwang Chang-gyu.
“Chances are that the company may come up with a management reshuffle following the Choi scandal,” he said. “Hwang’s potential resignation may weaken the firm’s profitability and dent investor confidence,” the analyst added, hinting the possibility that new management is likely to focus more on aggressive investment rather than improving profitability, contrary to Hwang’s years-long emphasis on improving earnings during his tenure.
Yuanta Securities analyst Choi Nam-kon said: “The latest scandal is weakening the firm’s stock value, showing that its management structure should urgently be reformed.”
KT will establish a CEO recommendation committee soon and decide whether to re-appoint Hwang as its next chief early next year.
“The firm’s top priority is to make its management structure more transparent by establishing a dual-audit system and empowering outside directors,” Choi said.