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KT subscribers jump ship as cost of fire grows

Nov 28,2018
KT’s week has taken yet another turn for the worse as the fire that caused major telecommunications disruptions in Seoul and the surrounding area has likely left the company with a hefty compensation bill and subscribers looking to take their business elsewhere.

According to data from the Korea Telecommunications Operators Association on Tuesday, the number of KT’s mobile service subscribers has been shrinking since a fire broke out at the carrier’s Ahyeon telecommunications switching center in Seodaemun District, western Seoul, on Saturday.

On Saturday, the total number of subscribers to the country’s second-largest mobile carrier fell by 828 people compared to the previous day. This means that the number of people that left KT was larger than those who newly subscribed to the carrier that day.

On the contrary, subscribers to SK Telecom increased by 246 people and LG U+ 582 people on the day of the accident.

On Monday, the number of KT subscribers again dropped by 678 people. During the two operating days, KT lost a net 1,506 subscribers.

Before the accident, the number of KT subscribers was on the rise. On Thursday, KT’s pool of subscribers increased by 69 people and by 83 people on Friday, but that trend was reversed after the fire.

The troubled company said most fire-affected services have returned to normal on Tuesday, but analyst Kim Hyun-yong from eBest Investment & Securities said, “KT’s sales and brand image can be damaged if the situation is not fixed quickly considering the long hours and broad scope of disruptions [caused by the accident,]” in a report Monday.

SK Telecom also suffered from problems in its mobile communications services in April and LG U+ last year, but disruptions were resolved in a matter of hours, not days.

Analysts estimate KT will have to spend at least 23.2 billion won ($20.5 million) in compensation to individual customers as it decided to waive a month’s phone bill for KT subscribers residing in the affected regions. The amount is roughly 1.6 percent of KT’s projected operating profit for this year according to Yang Jong-in, a research fellow from Korea Investment & Securities, Tuesday.

“We made our assumptions based on KT’s market share in the five affected districts in Seoul,” Yang said.

Another analyst Kim Joon-sop from KB Securities estimated the amount of compensation to be larger, at around 31.7 billion won.

As compensation plans for the business losses of small and microbusiness operators have not yet been laid out by the mobile carrier, the amount of compensation could snowball.

The accident comes at a tragic time for KT, as it was just a week before the carrier expected to introduce its first 5G network-based services. Korean carriers have been preparing to launch their first 5G services in dongle-type devices from December and had scheduled large press briefings this week prior to the official launch.

KT has now delayed its event. On Monday, the mobile carrier sent notices saying “we decided to cancel our scheduled event to quickly fix telecommunications disruptions caused by the fire,” to reporters.

The 5G network has been KT’s key focus and Chairman Hwang Chang-gyu had promised in September to invest a whopping 9.6 trillion won into its 5G business over the next five years. The company had also cemented its image as a leading 5G service provider by serving as the official telecommunications partner at the PyeongChang Winter Olympic Games earlier this year.

The latest incident, however, has hampered KT’s latest bid to take a bigger share of the local telecommunications market, which has been in a similar shape for the last decade: SK Telecom taking 50 percent, followed by KT with 30 percent and LG U+ 20 percent.

“SK Telecom, which boasts a well-established image of offering quality mobile services, and LG U+, which bets on cost-effective services, are likely to take advantage of the latest accident,” an industry insider said.

Still, KT is trying its best to restore the disrupted network.

According to KT, 96 percent of its mobile communications service has been restored, while 99 percent of landline internet and 92 percent of fixed-line phone services are repaired as of 11 a.m. Tuesday.

KT said microbusiness operators still suffering from telecommunications disruptions are those that depend on copper cables rather than more modernized fiber optic cables. While 99 percent of fiber optic cable-based landline phone services are back to normal, only 10 percent of the copper cable-based services have been restored.

“Copper cables are heavy and thick so they cannot be taken out through manholes for restoration,” KT said in statement. “They can only be recovered after our people are allowed into the tunnel where the fire broke out.”

To minimize damage to copper-cable users, KT said it will offer 1,500 wireless LTE routers to shop operators so they can use electronic card payment systems. KT is also offering 300 wireless payment devices to convenience stores after discussions with the various franchise headquarters. The carrier has also been rushing to convert copper cables to fiber optic ones in areas with a large number of shops since Monday.

From the government’s side, the Ministry of Science and ICT created a task force on Tuesday consisting of related government officials and representatives from mobile carriers to discuss how to manage low-level telecommunications facilities like the Ahyeon facility, which was graded D in terms of importance.


BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]


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