[E-GOVERNMENT]KT strengthens global efforts

Facing the challenge of keeping growth alive with the domestic telecom market nearing saturation, KT Corp., Korea`s largest fixed-line telephony and broadband Internet operator, is now looking for new opportunities overseas.

The company, which has been investing in foreign markets since 1993, is currently upping efforts to market its advancements in fixed-line, mobile and broadband Internet technologies to developing economies in the Asia Pacific. Through the market expansions, KT expects to become the region`s largest telecommunications operator by 2010.

"To overcome the limits of the matured domestic telecommunications market and find new revenue sources, developing foreign markets becomes the most significant solution in sustaining growth. Our advancements in technology and experience operating in broadband Internet, code-division multiple access (CDMA) mobile telephony and building backbone networks will continue to be at the center for our drive to tap foreign markets," said KT Chief Executive Lee Yong-kyung.

"We consider members of the BRIC bloc (Brazil, Russia, India and China) and emerging economies such as Thailand, Malaysia, Indonesia and Saudi Arabia as our main target markets. Building public switched telephone networks (PSTN), broadband Internet infrastructure and helping e-government projects at such countries will provide us with reliable revenue models," he said.

KT, a former state telecom monopoly, controlled 93.8 percent of the fixed-line telephony market and 51 percent of the broadband Internet access market in 2004. The company also controls 46.9 percent of its mobile affiliate KT Freetel Co., the second-largest wireless carrier here with a 32.1 percent market share last year.

KT saw its revenue grow 2.4 percent year-on-year at 11.85 trillion won for 2004 on net income of 1.26 trillion won, after the company added new customers to its high-speed Internet access services. Operating profit reached 2.12 trillion won. The company is targeting 11.9 trillion won in revenue and 2.1 trillion won in operating profit for 2005.

KT, which was privatized in 2002, has been struggling to sustain its stronghold in Korea`s telecom sector with the country`s fixed-line population dwindling and broadband Internet market approaching saturation.

The number of fixed-line telephony subscribers in Korea currently stands at 22.8 million from 23.4 million in 2002. In comparison, mobile-phone subscribers now total at 36.6 million, after first surpassing fixed-line users in 1999.

The number of broadband Internet subscribers increased just 1 percent year-on-year to 11.92 million last year. The growth rate is a significant decline from 101 percent in 2001 and 33 percent in 2002. Korea`s Internet penetration rate passed the 70 percent mark as of last year, with 31.6 million people of the country`s 44 million people over the age of six having online access, according to the Ministry of Information and Communication.

KT is also facing increasing domestic competition. With the government expanding number portability, allowing telephone users to switch carriers without changing numbers, KT lost more than 188,000 customers to fixed-line runner-up Hanarotelecom Inc. last year and saw its market share drop to 93.8 percent last year from 95.6 percent in 2003.

Although KT added nearly 500,000 new customers to its broadband Internet services last year, industry analysts believe Hanarotelecom`s recent acquisition of No. 3 broadband carrier Thrunet Co. will trigger a fierce marketing battle that could erode the profit of Internet operators. Hanarotelecom`s absorption of Thrunet gives them about 34 percent of the broadband market and puts them in a better position to compete with KT.

KT announced in August last year that it will invest 18 trillion won ($16 billion) through 2010 in five new growth engines - next generation mobile communications, home networking, Internet protocol-based broadcasting, info-tech enterprise solutions and digital content development. The company hopes the diversification will increase revenue to 27 trillion won ($23 billion) by 2010.

With the balance shifting over to next-generation services in the matured domestic market, KT has been seeking to take its expertise in fixed-line telephony and broadband Internet operations elsewhere.

The company`s efforts to increase overseas technology investments have been most significant in Russia. Russian telephone operator New Telephone Company, which KT owns a 72.5 percent stake, is now the largest mobile-phone operator in Littoral, Siberia. The New Telephone Company, which posted $49 million in revenue and $22 million through the third quarter last year, targets $100 million in revenue for 2005 by gathering more customers for fixed-line telephony and broadband Internet services.

KT is also participating in the licensing competition for GSM (global system for mobile communication) mobile telephony businesses in the Russian Far East.

"The New Telephone Company already controls 50 percent of the mobile telephony market in Littoral and saw our revenue increase by 20 times more compared to when we first came here seven years ago. However, with other telecom operators committing to increase their presence here, competition is intensifying," said New Telephone Company Chief Executive Song Woo-chan.

Vietnam has been another major marketing target for KT. In November last year, KT minted a partnership with Vietnam`s Vinaphone, a unit of telecom monopoly Vietnam Posts and Telecommunications Corp., to start mobile-phone services as early as by the end of this year. The company plans to eventually develop the relationship to establishing a joint venture with the Vietnam Posts and Telecommunications with the country`s policymakers increasingly opening up the domestic telecom market to foreign investors.

KT first advanced in Vietnam in 1994 by investing $40 million to install fixed-line telephony infrastructure in participation with the country`s urban development plans. In 2003, KT completed the installation of 4,100 high-speed Internet lines in 16 cities under a 2.1 billion won contract with the Vietnam Posts and Telecommunications. The company is also in talks with the Vietnam government to participate in the second phase of the country`s broadband Internet deployment plan, which targets the installation of 20,000 high-speed network lines in the country`s midsection.

In other investments, KT signed a $26 million contract with Iran`s Internet service provider AsiaTech to help setup 100,000 broadband Internet lines in 20 cities including Tehran by the end of this year. In a similar $25 million contract with Thailand`s TOT Corp., KT is currently installing 5,500 digital subscriber lines Bangkok and Phuket. The company also reached an agreement with the Bangladesh government last year to design architecture and supply equipment to upgrade 125,000 public switched telephone lines in the regions of Chittagong, Khulna and Sylhet.

Last week, KT said it is in talks with British Telecommunications Plc, the largest mobile-phone operator in the United Kingdom, on establishing a working group to develop technologies for voice-over Internet protocol applications and market them internationally.

(thkim@heraldm.com)



By Kim Tong-hyung