South Korean telecommunications companies, which in 2019 made Korea the world’s first country to launch a commercial 5G network, are ditching their “telco” identity.

No longer content to stay within the traditional boundaries of the telecommunications business, they are seeking business opportunities in areas where growth might come from in future.

For KT Corp., the industry’s No. 2, the new direction entails producing its own original cultural content, such as dramas.

The biggest player, SKT, is eyeing artificial intelligence.

“Shifting from the current telecommunications-centered business portfolio is essential for future growth,” said Kim Jang-won, analyst at IBK Securities. “The telcos would need to examine their capabilities in realizing the change by solidifying their current businesses.”

Such a business shift seems inevitable as the telcos, despite making massive investments in 5G infrastructure, have hit a wall in overall profitability, with the new mobile standard slow to hit the mainstream.

At their 2021 shareholders meetings held last month, all three of Korea’s mobile carriers vowed to rely less on mobile networks and seek more profits in other businesses.

While the country’s No.1 SKT and archrival KT unveiled details of content-related business plans, LG Uplus said it would focus on expanding contactless commerce channels.

The biggest change this year will be for SKT, including a new name.

The company has long been gauging the timing of its governance restructuring, along with streamlining its business portfolio, and it appears ready to push ahead with its plan this year.

Industry observers say that an official announcement of details of the restructuring is imminent – very likely this month.

SKT CEO Park Jung-ho said during the company’s shareholders meeting in late March that the details would be announced before June. 

The most widely anticipated scenario for SKT’s restructuring is to horizontally spin off the company to create a new intermediate holding company on par with the telecom business.

The new holding company would take control of major investments for SKT’s new businesses under its vision to grow into an AI specialist.

“A major change of direction lies ahead of us starting this year,” CEO Park said at the shareholders’ meeting. “SKT will transition to a leading AI company.”

SKT’s AI company vison puts artificial intelligence at the heart of all company operations and customer services.

“We are already applying AI to many of our services but it’s not reached a perfect level,” Park said. “We will make efforts to provide optimal solutions based on AI that meet customer needs.”

To accelerate development of AI technologies, SKT is working with Korea’s top companies, such as Samsung Electronics and Kakao.

Under a partnership with Kakao, the two companies are delving into core AI technologies, including those needed to establish infrastructure, accumulate data and develop language models.

The two will develop and share data in all forms, including text, voice and images, to utilize for AI-based learning.

With Samsung and Kakao, SKT is working on ways to address global challenges such as the latest COVID-19 pandemic.

The three tech firms have formed a joint group to bring each company’s AI technology and know-how together since March 2020.

The first joint project among the three, which is scheduled to be unveiled this year, is “AI Overcoming the Pandemic.” The AI program is being designed to predict users’ potential travel routes and provide warnings in advance about transmission risks.

KT has declared its vision to become a digital platform company by rebranding itself “Digico KT.”

“KT’s platform services based on AI, big data and cloud (computing) are contributing to discovering new growth engines across industries,” said KT CEO Ku Hyun-mo when he first announced the vision in October 2020.

For its transformation into a digital platform company, KT has conducted a remarkable organizational restructuring that enhanced the artificial intelligence and digital transformation convergence business group.

The group spearheads the company’s AI, big data, cloud, digital transformation platform and robotics operations. Along with the strong push for digital transformation, KT is also preparing to enter the bio-health business.

KT is tapping into its vast data pool of subscribers to develop platforms needed for small enterprises. The company’s big data analytics business is developing three key solutions to the country’s tourism market, commercial districts and demographic changes.

Among others, the firm’s most recent announcement that it would create a content platform in a global race against Netflix was part of the “Digico” initiative.

By Song Su-hyun (song@heraldcorp.com)