Korea Telecom will review its Africa expansion effort – New CEO wants to focus more on its domestic business

Mergers, Acquisitions and Financial Results

KT plans to review its business projects in Africa as its new CEO Hwang Chang-gyu wants to focus on bolstering the firm’s competitive edge in the domestic telecommunication business, said KT officials who are close to the matter, Thursday.

That suggests it is likely that Hwang, who will take office in March, will fold or scale down the company’s business in Rwanda and other countries on the continent, depending on the outcome of the review.

Under the leadership of outgoing Chairman Lee Suk-chae, the nation’s second-largest mobile carrier signed an agreement in March 2013 to invest $140 million in the African country to build a fourth-generation (4G) mobile network that will serve 95 percent of the country’s population.

The investment, however, is being questioned as it takes quite a long time to generate profits. After the signing of the agreement, the company has sought to expand business in other countries including Kenya and Uganda.

KT is now in talks with the Kenyan government to establish a joint venture to build a 4G LTE mobile broadband.

“One of the key priorities for the upcoming CEO is to recover KT’s telecommunications-related business. Synergy will be maximized only after realizing business structures that can generate profit in a stable manner regardless of market situations,” said one KT official by telephone, adding moves are already under way to realign its overseas business projects.

“The new CEO will reexamine our African business projects from a zero-base,” he said.

In fact, many parts of overseas projects are the legacy of the outgoing chairman who placed emphasis on two areas ? expanding the company’s overseas presence and diversifying its business portfolio ? to cut its heavy dependence on the domestic telecommunications market.

While market leader SK Telecom was passive in bolstering its international profile, KT was spending “billions of dollars” to export its telecom solutions to countries in Africa and the former Soviet Bloc.

The review of the overseas projects came as many KT officials feel a sense of urgency in domestic market competition because its globalization efforts are seen to have sacrificed its competitiveness in the telecom market.

“It’s pity that we are fighting with LG Uplus, the smallest local carrier, not the leader SK Telecom in the heated race for the long-term evolution (LTE) market. The number of our customers was falling and it’s fair to say corporate profitability isn’t so good,” said another KT official, stressing its management needs to find balances between telecom and non-telecom businesses.

But KT officials made it clear that the review does not necessarily mean that it aims to reduce its overseas projects as new CEO Hwang understands the importance of overseas business. Hwang didn’t respond to calls for comment from The Korea Times.

“The outgoing CEO was busy following ‘trendy business projects.’ KT should set short-term, mid-term and long-term targets if it wants to earn results from overseas business projects that the company is involved in,” said Chang Joon-hyuck, senior vice president at Atlas Research and Consulting.