Pantech begs carriers for its survival

Pantech CEO Lee Joon-woo, center, and two vice presidents talk to reporters at company headquarters in Sangam-dong, Mapo District, yesterday. [NEWS1]

Lee Joon-woo, CEO of cash-strapped mobile device maker Pantech, begged the country’s three mobile carriers yesterday to accept a debt-for-equity swap to save the company, promising an export-led recovery in the near future.

On Tuesday, creditors of the country’s smallest mobile phone vendor delayed a deadline for the mobile operators to decide on Pantech’s proposal to swap 180 billion won ($177.8 million) worth of debt for equity to July 14. It was the second delay of a deadline that was originally set for July 4.

The carriers - SK Telecom, KT and LG U+ - have remained mum on the suggestion, which was interpreted by many as a de facto refusal. Creditors are threatening that if they don’t respond by July 14, they will cancel a debt workout program and put Pantech under court receivership. The maker of the Vega Iron smartphone entered its second debt workout program in October.

“We have contributed to the businesses of mobile carriers with our distinctive technologies and products. But now, we seem to have become a huge burden on them,” Lee said during a hurriedly arranged press conference at the company’s headquarters in Sangam-dong, Mapo District, yesterday. “I know what was suggested by the creditors is not an easy proposal to take for the mobile carriers, but I hope they review it in a forward-looking manner so that we could survive.”

Pantech’s creditors, led by the Korea Development Bank, had said they would carry out a debt-to-equity swap worth 300 billion won, which would postpone principal repayments due by 2018.

But they said they would do it only on the condition that the three mobile carriers also exchange 180 billion won worth of debt for equity, as it is unclear if the creditors’ short-term financial support will be enough to revive Pantech.

Pantech currently owes 90 billion won to SK Telecom, 50 billion won to KT and 40 billion won to LG U+. If the three agree to the equity swap by Monday, they will become major shareholders in the company. But the companies are reportedly reluctant, doubting Pantech’s sustainability.

Pantech is competing with foreign handset makers for less than a 20 percent share in a domestic mobile phone market dominated by Samsung Electronics and LG Electronics.

If Pantech goes into court receivership, it is possible it could be bought by manufacturers in either India or China, which are reportedly interested in Pantech’s technologies.

Lee said he is ruling out the possibility of going into court receivership.

“Pantech has not established a plan regarding court receivership whatsoever,” Lee said. “We are afraid that would hurt our corporate brand value and damage our partners [subcontractors] and our employees.”

He said he is confident about Pantech’s survival.

Lee said Pantech had export sales of 500,000 units in the second quarter, which he said was more than double its overseas sales recorded in the previous quarter. It boosted the proportion of overseas sales for Pantech to its overall sales from 10 percent to 20 percent.

“The business normalization plan [by the creditors] projected that our overseas business will have a meaningful increase in two years. But it appears that we could see it take place next year,” Lee said.

Lee also asked creditors to continue the workout program. “We are a midsize company that has focused on the ICT industry for the past 20 years. We own technologies acknowledged by many mobile carriers around the world,” Lee said.

“We will learn from our failures in the past and will try to transform ourselves into an exporter that contributes to the ICT industry of Korea.”

BY MOON GWANG-LIP [joe@joongang.co.kr]