Thrunet sends shockwaves through telecom industry

Tuesday’s filing for court receivership by Korea Thrunet Co., the nation’s third-largest broadband carrier, has been followed by industry-wide repercussions. Banks are cutting their credit available to latecomers in the telecommunications industry, such as Hanaro Telecom, Dacom Corp. and Onse Telecom, which are bracing for a harsher business environment with a series of planning austerity measures. The Korea Development Bank decided on Tuesday to separately manage telecommunications firms and to step up credit management of the industry. It also set up, in principle, a plan to cut credit support for latecomers in the telecommunications industry. Kookmin Bank and Woori Bank also separately manage small players in the telecommunications industry. “After designating Thrunet as a company for ‘special management’ in August 2001, we reduced our credit extended to the firm from 13 billion won ($11 million) to 500 million won,” an official from Woori Bank said. “We will take similar steps for other latecomers in the telecommunications industry.” Kookmin Bank also said it would gradually reduce its loan exposure to smaller players in the industry that were given low credit ratings. “Those companies will have difficulties in paying debts with new loans when their outstanding loans mature,” said Jeon Won-bae, an analyst at Kyobo Securities. “They will also find it difficult to pool new capital.” Telecommunications firms are drawing up plans to minimize new investments while pooling capital through issuing bonds or bonds with warrants. Hanaro Telecom, Korea’s second-largest high-speed Internet service provider, recently canceled plans to merge Dreamline, one of its high-speed acquisitions, with its Internet service division. The move was not deemed to be cost effective, Hanaro said. Instead, the company said, it would focus on relatively low-cost business improvements and expansions, such as introducing broadband services with faster speeds. “We have already pooled 300 billion won out of the 850 billion won that we planned to attract this year,” said Joe Yong-wan, a financial executive at the firm. “The rest will be raised through issuing corporate bonds or bonds with warrants.” Dacom said it would step up austerity policies implemented last year. The company said it expected greater difficulty taking out bank loans this year. Onse Telecom will cut expenditures by cutting advertisement for its broadband service, company officials said. “We will concentrate on gaining ground in niche markets, capitalizing on the fact that our services charge about 5 percent less than our competitors,” said Kim Bo-seong, a company representative. by Choi Ji-young