South Korea's top fixed-line operator, KT Corp., is expected to get some relief from financial pressure as a significant number of workers applied for its
retirement program, analysts said Tuesday, although the effect of a streamlined workforce won't be long-lived.
KT, also the country's No. 2 mobile carrier by market share, said 8,320 employees applied for its voluntary retirement program offered from earlier this month. The number is much higher than the anticipated 6,000.
As those who have been with KT for 15 years or more were eligible to apply, about 70 percent of the applicants were in their 50s. They are set to leave the company by the end of this month.
The number of workers at KT will fall by a quarter to 23,868 from 32,188. Analysts estimate that KT will be able to save 700 billion won ($673 million) in labor costs annually.
The excessive number of workers has been cited as one of major drags on the firm's earnings. The pre-retirement figure compares with 4,200 at SK Telecom Co., KT's biggest rival, and 6,800 at LG Uplus Corp. as of the end of 2013.
Analysts say KT's financial health is likely to improve after it settles a one-time cost of about 1.4 trillion won in retirement package payments in the second quarter. But they also say more needs to be done for a full-fledged recovery in its earnings.
"A restructuring without a turnaround in revenue will only last for one or two years," said Choi Nam-kon, an analyst at Tongyang Securities Inc. "If KT is to become an attractive investment destination in the long term, it has to recover both the fixed-line and mobile businesses."
The fixed-line sector, KT's core business, has been the laggard as more users turn to mobile phones, with the division recording revenue of 2.9 trillion won in 2013, falling sharply from the 4.3 trillion won it posted in 2010.
The company is also struggling in the mobile sector, according to analysts, losing subscribers to the smallest player, LG Uplus, while No. 1 SK Telecom maintains its dominant lead in the market.
"KT must make efforts to minimize its internal unrest following the restructuring (ahead of the resumption of its business operation)," added Kim Jun-sup, an analyst at Etrade Korea Co.
The company's mobile business has been suspended since March 13 for using illegal incentives to lure new subscribers. It will resume operations on April 27. (Yonhap)