KT’s 8-month leadership vacuum causes delay in investment

KT Corp. holds an ad-hoc shareholders meeting at KT Research and Development Center in Seocho-gu, Seoul on June 30. [Photo by Yonhap]

The investment activities at KT Corp., a leading South Korean telecommunications provider with 25 trillion won ($19 billion) in annual sales, have been put to a halt as the company experiences a leadership vacuum.

KT lags far behind in the information technology industry where telecommunications companies are investing heavily to adapt to the new trend in the era of artificial intelligence (AI). There are growing calls to accelerate the appointment of a new chief executive officer currently scheduled for August.

According to the IT industry on Thursday, KT has seen no case of mergers and acquisitions (M&A) since the absence of its CEO from November last year. Previously, there were 15 high-profile M&As worth about 2 trillion won in three years when former CEO Ku Hyeon-mo was in office, including KT Skylife Co.’s acquisition of Hyundai HCN Co. and Hyundai Media Co. worth about 500 billion won.

However, the company has not had any deals since. KT invested 30 billion won in AI semiconductor company Rebellions Inc. and 130 billion won in cloud managed service provider (MSP) Megazone Cloud Corp. last year to build a cloud-AI semiconductor ecosystem, but even such investments have not taken place since the management vacuum.

Early this year, KT Sat Co., a satellite communication affiliate of KT Group, attempted an investment in an aerospace company in partnership with a finance company but abruptly stopped the process.

“KT Sat’s investment decision is an internal matter that is unrelated to the group’s management vacuum and we have invested in another startup besides the aerospace company in the first half of this year,” KT said. “KT recently announced an investment of about 7 trillion won in super-sized AI technology and plans to continue to expand investment.”

Although KT announced last week that it will invest 7 trillion won in AI over the next five years, industry observers note that large-scale AI investments will actually be led by the newly appointed CEO. “Many executives are waiting to see who the new CEO will be as there have been no executive appointments since the end of last year,” said an unnamed official from KT.

In the meantime, other telecommunication carriers are scrambling to invest in new businesses. SK telecom Co. announced Thursday that it has invested $100 million in U.S.-based urban air mobility (UAM) company Joby Aviation Inc. Following the investment, SK telecom acquired a stake of about 2 percent in Joby Aviation. Earlier in the second quarter, SK telecom had invested 15 billion won in AI startup Scatter Lab, Inc. as part of its efforts to transition into an AI company.

One of the three local telecommunications provider LG Uplus Corp., which operates a number of new platform businesses, also invested more than 10 billion won in startups such as AI-based review solutions, online education platforms, and edu-tech companies for infants and toddlers in the first quarter.

KT, in urgent need of business normalization, is scheduled to hold an ad-hoc shareholders meeting on Friday to appoint a new CEO. Once outside directors are selected at the first ad-hoc meeting, the company plans to announce CEO candidates in July and appoint a new CEO in August.

The most urgent item on the agenda is the appointment of seven outside directors. KT’s former outside directors Kang Chung-gu, Yeo Eun-jung, and Pyo Hyun-myung, resigned shortly before the annual shareholders meeting in March, leaving only one member, Kim Yong-heon, a former secretary general of the Constitutional Court. The seven candidates of new outside directors to be appointed at the upcoming shareholders meeting are Kwak Woo-young, former head of vehicle IT development center at Hyundai Motor Co., Kim Seong-cheol, professor of media studies at Korea University, Ahn Yeong-gyun, board member of International Federation of Accountants, Yoon Jong-soo, former vice minister of environment, Lee Seung-hoon, partner and head of global business at KCGI, Cho Seung-ah, professor at Seoul National University Business School, and Choi Yang-hee, president of Hallim University.

A controversy is expected at the upcoming shareholders meeting as major bylaw amendments that will affect the process of selecting and appointing a new CEO will be discussed. Key agenda items include abolishing the prioritized screening for CEO reappointment, changing CEO qualifications, and strengthening the voting criteria for CEO appointments. The most controversial issue is likely to be changing the CEO qualification requirements to corporate management expertise, leadership, communication skills, and industry expertise. As the phrase “knowledge and experience in the area of information and communication technology” has been removed from the existing requirement, concerns rise over the possibility of arbitrary, high-handed appointment of those who lack understanding of the telecommunications industry.