High hopes pinned on KT’s new CEO

A day after KT Corporation picked Hwang Chang-gyu, former head of Samsung Electronics, as its new chief, the stock price of the country’s second-largest mobile carrier surged yesterday to close almost 1.5 percent higher than on Monday.

Analysts reported growing expectations among investors that the new chief executive of the company, formerly known as Korea Telecom, will bring “change and innovation” based on his experience at Korea’s biggest blue chip producer.

Yesterday, shares of KT closed at 31,000 won ($29) on the Seoul bourse, 450 won, or 1.46 percent, higher, rebounding from a two-day drop.

Analysts said that the most important task for Hwang - after being officially named KT’s CEO next month at an interim shareholders’ meeting - will be to provide the telecommunications provider with a concrete growth vision.

When KT first introduced Apple’s iPhone in 2009, it briefly occupied the industry’s center stage.

Ever since, it has failed to maintain much of a presence amid tough competition in various businesses.

Although KT is known for its strong network system and infrastructure for both wired and wireless services, it hasn’t been able to come up with a decent strategy to promote its high-speed long-term evolution (LTE) mobile services. Last month, the number of KT subscribers dropped for a 19th consecutive month.

KT’s lukewarm performance has been reflected in its stock price as well.

Last year, shares of KT reached a peak at 41,250 won. However, on Monday, shares closed at 30,500 won.

Hwang Chang-gyu

“It won’t be easy for [KT] to improve its performance even next year,” said Yang Jong-in, an analyst at Korea Investment and Securities. “The business environment for KT will be challenging, especially at a time when marketing costs keep rising, and it has to compete with rivals to attract new subscribers. The role of a new CEO for KT is more significant now than in any previous phase.”

If any new CEO brings big expectations to the company, it is Hwang.

The 60-year-old Hwang is known for his presidency of Samsung Electronics’ semiconductor business from 2007 to 2008. He played a major role in guiding the company to become the world’s largest semiconductor maker.

Hwang joined Samsung Electronics after serving as a senior researcher at Stanford University’s electrical engineering department and also as an adviser at Intel, a U.S.-based company.

Hwang was known at the time to have received calls from various headhunters offering positions at well-known companies like IBM, but he decided to join Samsung Electronics.

“[The reason why I picked Samsung is because] I had in mind that I wanted [Korea] to beat out Japan [in the semiconductor market],” he recalled.

After Hwang joined Samsung Electronics in the early 1990s, the company had just started developing the 16-mega DRAM. Hwang is known to have played a big role in setting out the right strategy in the semiconductor market.

After the 2000s, Hwang put Samsung’s business focus on the NAND flash market, saying that “in the era of the ‘digital nomad,’ when people connect to the Internet wherever and whenever on their mobile devices, the market will be dominated by flash memory chips.”

The market outlook Hwang presented was spot on, and Samsung Electronics was able to beat Japan and become the world’s No. 1 memory chip maker.

At that time, Hwang earned the nickname Hwang Sun-sin after Admiral Yi Sun-sin, a renowned naval commander during the Joseon Dynasty (1392-1910). Yi repelled the Japanese fleet in the Myeongnyang Battle in 1597.

Hwang was also a naval officer.

KT shares rose yesterday partly because the market expects Hwang to sort out possible conflicts that could rise among parties surrounding KT. He is known to have a wide network of businessmen from global enterprises like Apple and Intel, and also from the government and political circles. Hwang, currently a professor at Sungkyunkwan University, was previously appointed by the government as the head of the R&D planning strategy division at the Ministry of Knowledge Economy, now the Ministry of Trade, Industry and Energy.

He was referred to as Korea’s chief technology officer.

There are also concerns that he lacks experience in wired and wireless services, the dominant business of KT. But some analysts note that this could be an advantage at a time of such fierce competition in the telecommunications market, when new ideas are needed.

“Because Hwang isn’t a guy that knows the rules in the mobile telecommunications industry, it would be difficult for us rivals to predict what strategy he will come up with for KT,” said an executive from a rival company. “His ideas could bring new air into the market.”

A vice president at Samsung Electronics said, “We cannot be glad just because he’s a former Samsung man.”

In fact, there are businesses in which KT and Samsung Electronics overlap, and that could be a problem for Samsung because Hwang knows a lot about his former workplace.

Meanwhile, some industry analysts say an immediate challenge for Hwang is changing the overall corporate culture at KT.

In 2002, the company became a private company and the government no longer holds a single share. But whenever a new administration moves into the Blue House, KT CEOs appointed by the previous government resign and often face criminal investigations.

New CEOs appointed by administrations in the past have tried to undo the work of their predecessors. Former KT CEO Lee Suk-chae, for example, became the KT head in 2009, and the first thing he did was introduce a new brand name for its wired and wireless services called Olleh, ditching the previous brand Qook.

“He has the responsibility of warming up the corporate spirit by boosting employees’ morale and creating a united corporate culture,” said Choi Jun-kyun, a professor at the Korea Advanced Institute of Science and Technology.

BY Lee Eun-Joo, Park Su-Ryon [angie@joongang.co.kr]