[비즈한국] A turbulent atmosphere continues to surround KT030200. This is due to the recent incident involving unauthorized micropayments on KT subscribers' mobile phones. Public sentiment is negative, fueled by suspicions that KT attempted to downplay the incident and retracted its initial statements regarding the hacking. KT CEO Kim Young-shub has stepped in to manage the crisis, including a promise of 100% compensation for damages. If CEO Kim, whose term ends next March, fails to resolve this situation before then, a second term is expected to be difficult.
Criticism from inside and out regarding incident response
Recently, an incident involving unauthorized micropayments on KT occurred in some parts of the metropolitan area. Micropayments for services never used were deducted from KT subscribers' mobile phones. According to the police, there are 199 victims, and the total damages amount to approximately 126 million won. The Gyeonggi Nambu Provincial Police Agency's Cyber Crime Investigation Unit announced on the 17th that it had apprehended two primary suspects. A police official stated, "We plan to apply for arrest warrants considering the suspects' flight risk and the possibility of destroying evidence," adding, "We will investigate the specific motives and details of the crime."
Due to this incident, public opinion toward KT and CEO Kim Young-shub is deteriorating. On the 9th, KT explained, "We have confirmed that there are no signs of personal information hacking." However, just two days later, on the 11th, the company announced that it had confirmed the possibility of personal data leakage for 5,561 subscribers and had reported it to the Personal Information Protection Commission.
Suspicions have also been raised that KT attempted to downplay or cover up the incident. The office of Rep. Hwang Jung-a of the Democratic Party of Korea pointed out, "Although KT was already aware of the micropayment hacking incident through media reports and police investigations, the infringement report submitted on the 8th stated there were no abnormal signs before the recognition of damages," adding, "It is difficult to explain this unless there was an intent to evade legal responsibility by downplaying or covering up the issue."
The KT New Labor Union criticized, "This incident is a total disaster caused by lax security management in advance and the management's poor initial response in trying to downplay and cover up the event," asserting, "CEO Kim Young-shub, as the ultimate person in charge, should take responsibility for the entire situation and resign."
KT is striving to handle the situation by replacing SIM cards for customers suspected of having their personal information leaked and promising 100% compensation for damages. Nevertheless, the voices of criticism have not subsided. There is a possibility that this could lead to more than just bad public opinion, potentially resulting in a decline in KT's performance.
Kim Hong-sik, an analyst at Hana Securities, analyzed, "In the case of SK Telecom017670 (SKT), although there was no actual monetary loss, the company incurred a total operating loss of 700 billion won—including SIM replacement costs, bill reductions, exemption of termination fees, and fines—because it caused tremendous inconvenience to the public and increased psychological anxiety." He added, "Since the backlash from KT customers is not yet severe, it might end without measures such as bill reductions, waiver of termination fees, or fines, but in a pessimistic view, the fallout could be significant, similar to the level of SKT."
Analyst Kim added, "Unlike SKT, the fact that there are many customers who suffered actual monetary loss is another cause for concern," noting that "(the victims) might engage in collective action, and in that case, the political sphere might also take interest."
In a press conference on the 11th, CEO Kim Young-shub stated, "I apologize to the public, our customers, and relevant organizations for causing concern, and I bow my head in apology to the affected customers," and added, "We will commit all our resources to take technical measures to prevent further damage and devise a plan to provide 100% compensation to affected customers."
The mood was good, but...
CEO Kim Young-shub's term runs until next March. Although CEO Kim has never officially mentioned a second term, rumors have been circulating in the telecommunications industry. Until recently, the atmosphere was not bad because KT's performance was on an upward trend. KT's revenue increased by 8.12% from 13.201 trillion won in the first half of last year to 14.2725 trillion won in the first half of this year, and operating profit increased by 70.28% from 1.0005 trillion won to 1.7036 trillion won during the same period.
The variable is President Lee Jae-myung. The head of KT has historically been evaluated as not being free from the influence of the government. Even during the selection of the KT CEO in 2023, there were suspicions of government intervention. The KT board of directors had nominated former KT President Yoon Kyoung-lim as the next CEO in 2023. However, after the prosecution began an investigation into charges such as breach of trust, former President Yoon expressed his intention to resign. Eventually, the KT board appointed former LG CNS CEO Kim Young-shub as the new CEO instead of Yoon.
When former President Yoon Kyoung-lim expressed his intention to resign, Rep. Cho Seung-rae of the Democratic Party of Korea criticized, "They say 'old boys' are lining up for the position created after ousting a candidate decided by KT's own procedures," and added, "The Yoon Suk-yeol administration has no concern for the future of KT, which is vital for national competitiveness in AI, big data, and cloud, but is only obsessed with dividing up the spoils of war."
It is beneficial for KT as well to have a CEO who can work in harmony with the government. If the relationship with the government is not smooth, the company could face disadvantages in future national projects. Even without this, KT already lost face by being excluded from the final selection for the five elite teams in the government-led "Autonomous AI Foundation Model Project" in August. It was the only one among the three major telecommunications companies to be left out.
As President Lee Jae-myung emphasizes pragmatic appointments, there is a view that sees the possibility of CEO Kim Young-shub's second term optimistically. It is true that KT's performance has been on an upward trend under CEO Kim's leadership, and some achievements have been made in the fields of AI and cloud. The stock price has also been rising. In August 2023, when CEO Kim took office, KT's stock price was only in the low 30,000 won range, but it rose to 59,200 won last July. However, the stock price has fallen since the micropayment incident and is currently barely hovering over 50,000 won.
Ultimately, the resolution of this unauthorized micropayment incident is expected to play a crucial role in CEO Kim Young-shub's second term. If public opinion does not improve, the KT board of directors may also find CEO Kim's reappointment burdensome. At a senior aides meeting on the 11th, President Lee Jae-myung said regarding the KT incident, "We must quickly confirm the full picture and take active measures to prevent further damage," and added, "Suspicions of a cover-up and downplaying of the incident have been raised in some quarters, so it must be clarified, and those responsible must be held clearly accountable."
KT stated that nothing has been decided regarding CEO Kim Young-shub's second term. A KT official stated, "CEO Kim Young-shub has not officially expressed his intention to serve a second term."