Hwang vows to get back to basics

Hwang Chang-gyu, new CEO of KT, shown at a meeting yesterday at the company’s research and development center in Umyeon-dong, southern Seoul. [NEWSIS]

KT Chairman Hwang Chang-gyu vowed to turn the nation’s No.2 carrier into a leading telecommunication giant by refocusing on its main business - mobile telecommunications.

Additionally, Hwang has decided to push forward with a reshuffle that will emphasize research and development and reduce the number of top executives. He announced the reshuffle along with a one-third reduction of executives.

The former Samsung Electronics chief, who took the post last month, was inaugurated yesterday for a three-year term.

“I feel great responsibility when the company is at its most difficult time,” Hwang said during his speech held at the company’s research and development center in Umyeon-dong, southern Seoul. “Through my experience in leading a global company [Samsung], I will turn KT into the No.1 telecommunications company in the country.”

One of the major changes Hwang plans is redirecting the company’s focus on telecommunications.

“We will raise our main telecommunications business and further develop it into the field of convergence. Through endless challenges we will regain our competitiveness in telecommunications and be the first to provide the best quality and differentiated services in the market.”

The chairman said he would significantly cut the number of high ranking executives in non-field departments such as management and support, while empowering lower-level managers and those with direct supervision responsibility.

Hwang said this will result in bold challenges, generate convergence among different departments, improve communication and boost efficiency.

Turning the tide won’t be easy.

KT continues to trail rival SK Telecom, the most dominant local carrier with a market share of more than 50 percent. Over KT’s shoulder, LG U+ is also making strides.

KT’s share of the telecommunications market over the past year lost nearly 0.7 percentage points to 30 percent.

During the same period, LG U+ saw its market share rise to 19.9 percent from 18.9. A 1 percentage-point expansion is considered a remarkable achievement in a saturated market.

KT lost more than 520,000 mobile communications subscribers last year as former Chairman Lee Suk-chae focused mostly on non-telecommunication businesses.

In addition, KT was the last to offer LTE service, six months after SK Telecom and LG U+ did in mid-2011.

Market experts say the quick move to LTE by LG U+ was the main reason it was able to eat into KT’s market share.

KT’s earnings have been shrinking throughout the past year. The 307 billion won ($283.4 billion) operating profit in the third quarter, which is the latest information, was down from 348 billion won in the second quarter.

According to FnGuide, an investment information provider, last week, KT’s operating profit in the final three months of last year is expected to shrink 61 percent to 120 billion won. It projected the company’s telecommunications business alone might post an operating deficit.

Other experts make similar projections. Woori Investment & Securities projects operating profit to 13.8 billion won.

KT will announce its earnings report for the fourth quarter today.

One of the biggest challenges Hwang faces is KT’s growing number of affiliates, which market experts cite as one of the leading reasons for the weakening performance of KT.

KT affiliates nearly doubled during the past five years. There were only 29 in 2008 but they rose to 55 at the end of last year as Lee, who joined KT in March 2009, aggressively pursued mergers and acquisitions in search of a new growth engine.

Market experts say slimming down the organization will not be easy.

Yet if Hwang follows through with his plans, many expect to see improving profitability.

“We expect KT’s profitability to improve with uncertainty [of the company] solved and cost cuts through restructuring,” said a Woori Investment & Securities analyst.

BY LEE HO-JEONG [ojlee82@joongang.co.kr]