Why is KT under Koo Hyun-mo selling its telecommunications subsidiaries?

[Image source=Yonhap News]

[Asia Economy Reporter Seulgina Jo] KT's decision to sell its corporate wireless communication subsidiary KT Powertel is part of a 'new restructuring' aimed at breaking away from its traditional telecommunications business framework and transforming into a digital platform company. This move is interpreted as a strong reflection of CEO Koo Hyun-mo's determination to focus on new growth businesses through 'selection and concentration' regardless of the sector.

While most of the subsidiaries sold so far have been in non-telecommunication areas such as car rentals, this sale is expected to mark the beginning of bold business restructuring within the telecommunications sector as well.

According to KT on the 23rd, the company recently held a board meeting and decided to sell its entire 44.85% stake in KT Powertel to digital security equipment manufacturer IDIS Co., Ltd. Since selecting IDIS as the preferred negotiation partner for the sale of KT Powertel on the 11th, KT has been conducting negotiation procedures. IDIS Holdings also announced the day before that its subsidiary IDIS will acquire 7,771,418 shares of KT Powertel for 40.6 billion KRW.

KT Powertel is a KT affiliate specializing in industrial two-way radios (TRS) as its core business. Although its annual sales reached 127 billion KRW in 2010, sales have continuously declined as the telecommunications market shifted to LTE and 5G mobile communications. Annual sales plummeted to 62.7 billion KRW in 2019. Recently, the company has been attempting to shift its main business focus from wireless communication to the Internet of Things (IoT). The company has about 140 employees.

Industry insiders analyze that this sale of KT Powertel signals a group business restructuring. Since his inauguration last year, CEO Koo has presented a vision to transform KT from a telecommunications-focused company into a digital platform company by concentrating investments on new growth businesses represented by artificial intelligence (AI), big data, and cloud computing. CEO Koo also announced that "preparations for subsidiary spin-offs and value reassessments through listings are underway," indicating that group business restructuring will accelerate starting this year.

What draws particular attention is that this is a sale of a telecommunications affiliate, not a non-telecommunications one. Since privatization, telecommunications divisions have not been prioritized for sale due to their connection with the core business. This reflects CEO Koo's strong will to reorganize the group’s business structure without regard to sector boundaries.

KT is expected to use the proceeds from this sale to secure resources for new growth engines and reorganize its group portfolio into a platform company focused on growth businesses such as finance, media, and content.

IDIS, the acquirer of KT Powertel, is a digital security equipment company that sells products in the United States, Europe, Japan, and the Middle East. KT and IDIS plan to complete the KT Powertel shareholders' meeting and regulatory approvals by the end of March and finalize the contract.

The KT Powertel labor union is protesting the sale as a "fire sale." The union stated, "KT Powertel is one of the few companies within the KT Group that provides radio services and operates independently," adding, "KT Powertel, an excellent group company responsible for national backbone telecommunications, is being sold at a fire-sale price to a CCTV manufacturer with no relevance, emphasizing restructuring." They also declared, "We will prevent the fire sale through one-person protests and protests involving nine people while complying with COVID-19 prevention guidelines," and "if necessary, we will not hesitate to go on a general strike."

This content was produced with the assistance of AI translation services.