Kakao Mobility faces probe over revenue calculation

Home > Business > Industry

Kakao Mobility faces probe over revenue calculation

Published: 31 Oct. 2023, 18:31 Updated: 02 Nov. 2023, 11:40

PARK EUN-JEE
park.eunjee@joongang.co.kr

A Kakao Mobility signboard at the company office in Pangyo, Gyeonggi [JOONGANG PHOTO]

The Financial Supervisory Service (FSS) is looking into Kakao Mobility’s financial statements to determine whether the firm overstated its revenue, Kakao Mobility confirmed on Tuesday.

The mobility subsidiary of Korea’s tech giant Kakao said the financial watchdog is investigating whether it appropriately conducted accounting on transactions with affiliated cab operators.

Kakao Mobility pays between 16 to 17 percent of the fare revenue to affiliated cab operators for the services they provide, including the sharing of driving data.

KM Solutions, a subsidiary of Kakao Mobility under which affiliated taxi drivers are registered, receives 20 percent of the fare revenue from affiliated cab operators in return for providing its car dispatching platform, device maintenance and regular quality management of franchise services.

The Kakao Mobility and KM Solutions contracts signed by affiliated cab operators should be seen as a single contract, and only the difference in the commission rate should be calculated as Kakao Mobility’s revenue, according to the FSS.

But Kakao Mobility argues its deals with the affiliated cab operators and those signed by KM Solutions are separate.

The deals are carried out and operated “independently,” said Kakao Mobility in a statement.

Affiliated cabdrivers that sign up with KM Solutions do not necessarily have to sign a deal with Kakao Mobility, it added.

Some critics speculate the calculation method is a way for Kakao Mobility to overstate its revenue ahead of the planned initial public offering (IPO). Higher revenue pushes up corporate value, which can raise the IPO price.

Kakao Mobility said exaggerated revenue does not affect the company’s cash flow or operating profit. It rather pulls down the operating profit rate, which could dwindle the corporate value and ultimately make the environment unfavorable for the company to go public, it said.

Meanwhile, the Fair Trade Commission, Korea’s antitrust regulator, is looking into whether Kakao Mobility unfairly excluded taxi drivers working with competing mobility operators from receiving taxi-hailing calls, according to local media reports.

Kakao and Kakao Entertainment, another Kakao subsidiary, are currently under fire over allegations of stock price manipulation linked to a takeover bid of the entertainment powerhouse SM Entertainment.

Kakao and HYBE, which manages BTS, were involved in a bidding war to take over SM Entertainment in March. The allegations are rooted in suspicions that executives at Kakao and Kakao Entertainment may have interfered with an open market purchase of HYBE.

BY JIN MIN-JI [jin.minji@joongang.co.kr]