Prosecutors continue to pile pressure on KT head

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Prosecutors continue to pile pressure on KT head

The prosecution said yesterday its investigators raided eight more offices of telecommunication company KT and homes of its executives, following initial searches last week.

According to the Seoul Central District Prosecutors’ Office, its investigators and prosecutors were sent to KT offices in Bundang, Gwanghwamun and Seocho, as well as homes of some KT employees. The raids took place from 11 p.m. Thursday and were completed around 10 a.m. yesterday.

The prosecution said the raids were part of its ongoing investigation into breach of trust accusations against KT Chairman Lee Suk-chae. The raids took place while Lee was attending a business conference in Rwanda and hours before the country’s second largest mobile carrier announced a sluggish performance for the third quarter.

Lee was accused by a civic group of incurring losses worth tens of billions of won to the telecom giant by making poor investment and business deals.

KT, formerly known as Korea Telecom, was once the nation’s telecommunications monopoly and a public company. But it was privatized in 2002.

Although the government doesn’t own a single share in the company, KT has a bitter history of having its CEO replaced at the start of new administrations, also known as the “public company CEO jinx.” The government tends to consider formerly public companies as their trophies or possessions.

KT’s sale of some buildings from 2010-12 was also under investigation. The company sold 39 buildings at 75 percent of their appraised values and the deals incurred about 86.9 billion won ($81.93 million) in losses to the company and its investors, the prosecution said. After it sold the buildings, KT continued to rent space in them, and prosecutors are investigating if Lee influenced the deals.

Lee started a three-year tenure as KT chairman in 2009 and his term was extended last year during the final months of the Lee Myung-bak presidency. In recent months he has been under pressure to make way for an appointee by the Park Geun-hye administration.

The prosecution said KT executives will be summoned after evidence is analyzed. Lee is also expected to be questioned later this month. He was scheduled to return to Korea from Africa this weekend.

The investigation into KT was prompted by two criminal complaints against Lee. In February, the People’s Solidarity for Participatory Democracy, a civic group, asked the prosecution to investigate Lee for causing KT losses.

Earlier this month, the group joined forces with the National Union of Media Workers, which represents journalists, and asked the prosecution to investigate Lee for the dubious buildings sales.

The prosecutors raided 16 places on Oct. 22, including KT’s headquarters and Lee’s home.

“We have already explained that the charges cited in the complaints are legitimate, but misunderstood, management decisions,” KT said in a brief statement to journalists.

The chairman’s woes will be augmented by the company’s slump.

KT said yesterday that its sales in the third quarter, ended in September, were 5.73 trillion won, down 7.3 percent from a year earlier. One of the country’s three mobile carriers, it is the only one recording negative growth. SK Telecom said Tuesday its sales rose by 1 percent to 4.12 trillion won in the third quarter from a year earlier. Sales at LG U+ grew by 2.1 percent to 2.88 trillion won.

KT blamed plummeting sales of mobile phones for the decline. Its sales of handsets plunged 39.1 percent from a year earlier to 799.7 billion won.

Sales in its mobile operations, the country’s second largest after SK Telecom, also declined 2.3 percent to 1.71 trillion won.

A weeklong suspension of business in early August, imposed only on KT as a penalty for giving customers excessive subsidies on phones, was blamed for the decrease in sales.

KT’s operating profit, however, rose 22.7 percent from a year earlier to 307.8 billion won, thanks in part to the growth in other services, such as media, creative content and finance.

The company said its mobile business will also turn around soon.

“We are getting back the subscribers quickly as we have been able to provide the world’s first LTE-A service,” said KT Chief Financial Officer Kim Bum-joon.

BY SER MYO-JA, MOON GWANG-LIP [myoja@joongang.co.kr]

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