Korea's overall telecom market (wireless + wireline) has grown at double digit rates for the past 5 years, said Jeong-Soo Suh, CFO of KT, speaking at the UBS conference in New York. But the fast growth is now over and the market is only expanding at a low, single-digit pace.
Korea's telecom regulatory environment has been changing over the past years, including new requirements for local loop unbundling and local number portability, but so far these have had minimal effect. Suh said KT is too big and too dominant to avoid the impact of regulations. The question is only how smart they can be in responding to change.
Suh attributed much of KT's rapid growth in the past few years to tariffs for voice and DSL that have been far below its international peers. For instance, he cited these figures for DSL:
Monthly DSL Rates (US$/month)
- Telefonica: $102
- France Telecom: $63
- Telstra: $61
- BT: $52
- BellSouth: $51
- KT: $29
Because of the low tariffs, KT's competitors have had a difficult time depreciating the cost of their networks. The low tariffs have also made it difficult for competitors to launch new services, such as VoIP, because there is not much room for margins.
Suh said KT is moving aggressively to cut its costs. The company recently announced a 13% headcount reduction across the company. By the end of 2004, KT expects to have 38,200 employees, down from 58,000 in 1997 and 46,000 in 2000.
Competition and new growth opportunities are transforming the company. In 1998, Korea Telecom held 100% of the local voice market, 91% of the domestic long distance market, and 70% of the international long distance business. In 2002, KT held 32% of the wireless market, 47% of the broadband business, 96% of the local voice business, 85% of the domestic long distance market and 66% of the international long distance business.
New growth opportunities for KT include new enterprise services. In the past, KT has focused more on residential services because the large Korean conglomerates have traditionally operated their own networks. Suh believes there is an opportunity as more of these conglomerates outsource their networks. He sees a second growth opportunity in converged and bundled services. One idea is to combine satellite TV services with IP multicasting over broadband. Two other future growth areas are telematics and home networking of consumer appliances. KT is also working on a 2.3 GHz "portable Internet" application for PDAs.
KT's CAPEX is falling as a percentage of sales and is expected to be just under 2.1 trillion won for 2003. KT is spending on VDSL now but in the long-run would like to move to fiber access.
KT's 2004 - 2007 CAPEX Breakdown
- FTTC/FTTH -- 23%
- NGN -- 19%
- New business initiatives -- 19%
- Regular maintenance -- 39%
