KT gets restructuring green light as part of AI transition

The board of KT approved the establishment of two subsidiaries as the company restructures to transition to an AI-centric business, a move blasted by its union.

KT CEO Kim Young-shub speaks at a press event to explain the company's five-year partnership with Microsoft in central Seoul on Thursday. [YONHAP]

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KT’s board approved the establishment of two subsidiaries focused on network operations in a board meeting Tuesday, a decision that may involve reassigning thousands of employees as part of the company’s efforts to streamline its workforce for its transition to AI.

The move is part of KT’s efforts to pull away from its stagnant telecommunications business to invest in the burgeoning AI industry, as well as to improve management efficiency.

The two subsidiaries, tentatively dubbed KT OSP and KT P&M, will be registered as legal entities by Jan. 1 next year. KT OSP will handle the design and construction of communication lines, while KT P&M will design power facilities within KT’s network stations.

The two companies will be wholly owned by KT, with capital investment for KT OSP totaling 61 billion won ($44.8 million) and 10 billion won for KT P&M.

KT plans to relocate employees related to the network sector to the new subsidiaries or other affiliates, while offering a voluntary retirement option for those who do not wish to transfer.

The exact number of impacted personnel was not outlined at the board meeting, according to a KT spokesperson, but a leaked internal document mentioned that the scale is estimated at some 6,000 employees. “We have thoroughly factored in employment stability and plan to proceed with job and personnel reassignments, offering reasonable levels of compensation, benefits and opportunities for employment extension,” the spokesperson said. “Specifics will be finalized after consulting with the labor union.”

Media outlets reported that 3,400 out of 4,400 employees that handle tasks relevant to network operations are to be transferred to KT OSP, and 380 out of 420 will move to KT P&M. Some 170 employees will also be transferred to other affiliates such as KT IS, which operates customer centers.

Other businesses deemed inefficient will be dissolved.

Voluntary resignations may be offered to employees who have worked for 10 or more consecutive years or those with a year or less remaining until retirement.

KT’s labor union is strongly protesting the decision, claiming that the current plan does align with the company’s welfare programs and is therefore disadvantageous to workers. Some 300 union leaders plan to gather at KT’s headquarters in central Seoul for a protest on Wednesday.

The opposition is fueled further by the fact that KT CEO Kim Young-shub announced that there will be “no large-scale restructuring” at a shareholder meeting in March.

After the restructuring is completed, KT’s 19,370 employees may be reduced to a range of 13,000 to 15,000. KT currently retains the largest workforce among domestic mobile carriers compared to SK Telecom’s 5,741 employees and the 10,695 at LG U+.

The decision comes five months after KT initially announced a partnership with Microsoft to focus on the AI and cloud sectors. The two plan to jointly invest 2.4 trillion won over the next five years to co-develop AI models as well as foster related talent and data center infrastructures.

KT and Microsoft also plan to establish a joint venture as a KT subsidiary by the first quarter of next year, and the Korean company has been on the move to recruit talent in the AI and cloud sectors from this year.

With the announcement, KT joins the restructuring wave sweeping through the telecom industry as it jumps on the AI business bandwagon. Last month, SK Telecom, the nation’s largest mobile carrier, raised the severance pay for its retirement program, offering up to 300 million won from a prior maximum of 50 million won in a bid to stimulate early retirement, a move interpreted to be part of the SK conglomerate's broader strategy of investing in AI.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]