[Q&A] Hwang Hyun-sik, LGU+ CEO: "M&A Will Be Pursued If Necessary... AI Solution Companies Are a Priority"

[Asia Economy Reporter Seulgina Jo] "Through new growth, we will expand the proportion of non-telecom sales from the current 20% level to 30% by 2025. If necessary, we will also pursue strategic investments or mergers and acquisitions (M&A).”

Hwang Hyun-sik, CEO of LG Uplus, held his first press briefing since taking office on the 30th of last month at the Yongsan headquarters in Seoul, expressing his ambition to transform LG Uplus into a "digital innovation company leading enjoyable changes in customers' daily lives." He plans to increase the sales proportion of non-telecom businesses such as media, IDC, and new businesses?considered future growth engines?to 30% of the total by 2025, while securing core competencies in six major fields that form the foundation of new businesses: AI, big data, cloud, content, security, and B2B solutions.

CEO Hwang explained, "If necessary, we will also pursue strategic investments or M&A. We are prioritizing companies with AI solutions in smart mobility and smart factories, while securing core competencies related to security, AI, and big data." Below is a Q&A session.

▶Related article on July 1, page 12 <LG Uplus unveils new business: 'Non-telecom sales 30% by 2025... Good news on Disney+'>

-What are the new business areas you are focusing on?

▲In B2C, we will focus on areas we have excelled in. ▲U+ Kids’ Land ▲U+ Idol Live ▲Augmented and Virtual Reality (AR·VR) ▲U+ Pro Baseball and U+ Golf are areas where we have continuously provided good services to customers. We want to raise the service level in these areas and ideally expand into platform businesses. For that, functionality is necessary, but original content must also complement it.

There seem to be many opportunities in B2B business as well. Again, areas where LG Group has strengths are important. The group’s strength lies in manufacturing and SI based on manufacturing. We believe we should focus on growing smart factories and mobility.

▲(Choi Taek-jin, Head of Corporate Division) Regarding B2B, we are focusing on smart factories and mobility. We are preparing to create smart factory references and commercialize them together with group companies engaged in factory-based businesses such as electronics, chemicals, and parts suppliers. The response from reference customers created since last year has been hopeful. We expect the business to start in earnest next year. Although mobility is behind competitors, the connected car sector is becoming active centered on infotainment, and LG Electronics is strengthening its automotive parts business, which will create synergy.

-The heads of the New Business Promotion Division and Consumer Division are vacant. What are the plans for personnel and organizational restructuring?

▲For the Consumer Business Division, Vice President Jung Soo-heon, who previously worked in overseas marketing and sales at LG Electronics and at Sprint in the U.S., will join. He is quite an expert in telecommunications. We will bring him in to seek new changes in B2C. The New Business Division head position is vacant, and there was ambiguity in its scope overlapping with the Consumer Business. We will clearly reorganize it into a 'business unit' with three teams: Kids’ Land Business Unit, Content/Platform Business Unit, and Advertising Business Unit. We are looking for leaders for these positions externally. We plan to establish an organization directly under the CEO to unify tasks related to data collection, analysis, and utilization and to accumulate capabilities.

-How is the partnership with Disney Plus progressing? Will the service be available within this year?

▲Negotiations are positive. From our negotiations, Disney is a very difficult and demanding company. Their standards for service level and quality are strict, and legally they have very stringent regulations. We think we have advantages over competitors in three aspects. First, Disney’s top requirement is customer convenience, and Android-based IPTV set-top boxes provide the best structure to deliver Disney Plus to customers. Second, our target segment is quite similar to Disney’s target segment. Third, Uplus has many successful cases of marketing collaboration with advanced overseas companies like Google and Netflix. We are discussing with Disney in a good direction, but negotiations are not yet complete. We will inform you once the results are finalized. The launch timing is being reviewed by Disney Plus, so it is not appropriate for me to comment.

-There is a dispute over program usage fees with CJ ENM. How are you approaching negotiations?

▲First, regarding CJ ENM, we apologize for the inconvenience caused to customers due to differences in positions between the two companies. When acquiring HelloVision, we had a very good cooperative relationship with CJ. We are still cooperating in various fields. We collaborate in content, have investments in Genie Music, and have business relations in home shopping. We will approach negotiations with a more open mind so that inconvenience to customers does not continue.

-You mentioned active investment in content. Are you aiming to grow your own OTT like competitors? What about investment scale and market goals?

▲We want to focus more on existing service areas. We think it is still difficult to create content targeting OTT services to provide additional value to customers. Rather than our own OTT, we will focus on strengthening Kids’ Land, Pro Baseball, Golf, and idol-related AR·VR services. Also, we have PP business and HelloVision’s broadcasting business, for which we will produce original content. We have established the direction including investment scale and are discussing how to reinforce it. We plan to develop concrete investment plans.

-Have you decided whether to use Huawei equipment in the 28GHz band? What is your view on Huawei risk?

▲It is not appropriate for us to say whether we will or will not use equipment from a specific company. The biggest concern externally is probably security. Regarding security, we do not use Huawei equipment in the core network, and we operate the network ourselves. We thoroughly manage security issues through domestic and international consulting firms. We are rigorously managing risks to prevent any problems. The 28GHz band is a local-level investment rather than nationwide, and decisions will be made depending on the region.

-There is an evaluation that you are passive in business expansion and responding to changes compared to competitors. What do you think?

▲We have been evaluated as not proactive in changes or investments. When we tried to participate as investors in several companies, others said, 'LG Uplus does not do these things well,' and the market seems to view us passively. It is indeed a time when change is needed and when we should move actively.

We have two points that differ from competitors. First, in terms of capacity, we cannot do many things at once. We need to focus more on whether the service is necessary for customers and whether it connects to our core telecom business to provide better value. Second, the reason we are seen as passive is that we invest less in new technologies. Unlike competitors, we share many functions with LG Group affiliates. Although we have fewer AI personnel, we collaborate with the group’s AI research institutes. We plan to systematize business with the group and move forward.

-KT plans to commercialize 5G standalone mode (SA) in July. When will Uplus commercialize it?

▲We are also ready for SA. Our technical choices differ from competitors, but we are prepared to implement it if necessary. We do not yet feel the need to apply SA immediately. We can apply it promptly depending on market and customer needs.

-Recently, there was a ruling on Netflix-SK Broadband. Could this affect LG Uplus’s negotiations with Netflix? Also, will it impact negotiations with Disney Plus?

▲The Netflix case still has a second trial pending, so we need to wait for the outcome. Based on the current ruling, it does not seem to be enough to change the contract between the two companies. Interpreting the first trial ruling, it is correct to pay network usage fees, but the amount can be negotiated depending on the cooperative relationship rather than following a uniform rule. This is fundamentally correct. The goal is to find ways to provide good network quality to customers, and how to share the burden is a matter of negotiation.

-Is the class action lawsuit by 5G consumers due to quality issues caused by telecom companies focusing on non-telecom businesses? The three mobile carriers will need to respond together.

▲It is an excessive interpretation to say that quality deteriorated because investments were reduced to pursue non-telecom businesses. Our core business is telecommunications, and whether Kids’ Land or AR·VR are non-telecom businesses is open to interpretation. Regarding the class action lawsuit, it is an ongoing matter, so it is not appropriate for me to comment at this time.

-Since taking office, you have emphasized 'true fans' and 'qualitative growth.' What has been your biggest achievement so far?

▲By changing the way we work customer-centrically, launching services, and reducing pain points, more customers will recognize us. Encouragingly, in the first half of the year, we have been working internally to reduce customer pain points to zero, and these have been gradually decreasing, which is a good result. If we continue customer-centric management, the result will be many long-term customers saying, 'Uplus is good, try it.' Looking at management indicators, we will be a company with low churn rates and high customer satisfaction.

-You mentioned active equity investments and M&A. What are the priorities? Are you considering acquiring cable TV SOs?

▲We are placing a low priority on investments for quantitative growth. Cable TV acquisitions may depend on how the market changes, but at this stage, we do not plan to allocate resources for that. We will focus on prioritizing our services and content and enhancing core competencies. However, we will monitor market changes.

We prioritize investments in services, content, and core competencies. For example, we are looking more at opportunities to secure core competencies related to security, AI, and big data, and companies with AI solutions in smart mobility and smart factories.

-At MWC, Tesla CEO Elon Musk announced the 'Starlink' satellite internet service. Do you see it as a game changer?

▲It is difficult to say definitively whether satellite communication will be a game changer. Some companies are conducting global business through satellites, currently providing services only to customers with specific needs. Satellites are expected to play an important role in 6G. Telecom companies should pay attention to 6G, but many possibilities remain open. Since 6G is still in its early stages, we are closely monitoring technological trends and related alliances that may form.

-LG HelloVision’s stock price is soaring amid merger rumors. What are the long-term merger plans and acquisition synergies?

▲A merger with LG HelloVision is not yet feasible, and we have not internally reviewed it. Regarding synergies from the acquisition so far, Uplus’s high-quality IPTV service is providing better service to HelloVision customers, and there have been synergies through content sharing and network investment efficiency. Synergies are progressing as planned. However, expanding mobile subscribers through bundling is expected to take more time.

-The 5G quality evaluation results for the first half of the year will be released soon. What do you expect?

▲Evaluation results may show some shortcomings in speed, but the evaluation criteria include coverage issues from the customer’s perspective and a comprehensive assessment of telecom companies’ investments, so results may vary. External evaluations show we have the best quality in Korea and achieve high efficiency despite having only 20MHz of spectrum. Domestic evaluations are meaningful, and we will do our best in investment and network optimization.

▲(Park Hyung-il, CRO Vice President) Since last year, 5G quality evaluations have been based on NSA mode, combining LTE speeds. In last year’s 5G quality evaluation, we received good ratings in coverage area for both the first and second halves. Uplus was the most proactive in network construction.

-Metaverse is a hot topic. What preparations are you making?

▲Metaverse is expected to become very important. It will be a good opportunity to introduce new content to customers. We are not at the stage of platformizing the metaverse itself. We are considering introducing metaverse into our services. We are making the necessary technical preparations and are reviewing equity investments in related companies.

-Wireless market share is rising. Do you have additional market share goals?

▲If we set numerical goals, we might lose sight of customers. We will focus more on customers, and growth should be qualitative. Our truly important internal goal is to be the company with the lowest churn rate. We will concentrate on that.

-You said you will raise the proportion of non-telecom sales to 30% by 2025. Which field will account for the largest share?

▲The largest in the non-telecom area will likely be broadcasting, such as IPTV. In terms of growth rate, B2B smart factories and mobility will be significant.

-You said you will strengthen basic services rather than investing in OTT. What is your OTT strategy?

▲Regarding Netflix, YouTube Premium, and Disney Plus, our consistent view is that opening up to provide customers with more choices is a better direction. The future direction is to allow customers to freely choose from a wider range of services.

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