March 11, 2009 / 1:11 AM / 11 years ago

UPDATE 1-KT CEO sees sales growth from KTF merger, eyes abroad

* Planned merger with KTF seen boosting stalled sales

* Could partner with NTT DoCoMo to enter foreign markets

* CEO says KT share price yet to reflect post-merger outlook (Adds details, more quotes)

By Rhee So-eui

SEOUL, March 11 (Reuters) - South Korea’s KT Corp (030200.KS) expects a planned merger with its mobile unit KTF 032390.KS to help boost its stalled revenue within the next two years, its chief executive said.

Lee Suk-chae also told a news conference that KT, South Korea’s dominant fixed-line and broadband operator, would explore business opportunities abroad and hoped to enter China.

Last month KT won approval from South Korea’s anti-trust agency on its plan to merge with KTF, a long-expected move aiming at diversifying its services and cutting costs. [ID:nSEO345491]

KTF, the country’s No. 2 mobile carrier, had been spun off from KT when KT was still a state-run company.

Lee, a former telecom minister, reiterated that absorbing KTF would benefit the industry as well as consumers with new services combining fixed-line, mobile and other products.

“It will take about two years for the new services to bear fruit,” Lee said, adding KT would cut costs and focus on making the firm more efficient until those benefits show up on the books.

KT aims to save about 500 billion won ($333.1 million) in labour costs over the next five years but has no plans for job cuts.

Outside Korea, KT would “actively” explore business opportunities, Lee said. Entering a foreign market jointly with its Japanese partner NTT DoCoMo (9437.T) would be beneficial, he added.

The Japanese company currently has an 11 percent stake in KTF and would remain as a key alliance partner even after the merger with KT, Lee said.

When asked about prospects for KT entering the China market, Lee said: “It will be difficult but there will be a chance.”

The merged KT-KTF is likely to launch June 1, pending approval from the country’s telecom authorities.

Lee said costs for the merger would be “manageable.” A recent drop in KT and KTF share prices have raised concerns about excessive buyback requests from shareholders opposing the deal.

“The current share price does not reflect the real outlook after the merger,” he said.

KT, which has 90 percent of South Korea’s fixed-line market and 44 percent of its broadband customers, is faced with stagnant revenue growth and increasing competition, with widespread mobile phone usage and Internet telephony eating away at its user base.

But Lee said KT had assets that could create attractive new services when combined, from extensive fixed-line networks to niche services such as pairing 3G networks with cheaper mobile WiMax, dubbed “Wibro” locally.

In the long run, KT would explore new businesses such as solar power, Lee said. Among KT’s assets are satellite stations that are located in prime spots for solar power generation.

KT and KTF compete with SK Telecom (017670.KS), the countrys’ top mobile carrier and its affiliate SK Broadband 033630.KQ, as well as LG Group’s telecom units.

South Korea’s telecom market is fully saturated; 95 percent of the population have a mobile phone and 92 percent of households have broadband access. (Editing by Jonathan Hopfner)

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