KT Releases United Brand 'QOOK'
Employs a strategy to capitalize on the upcoming merger with KTF
KT, the nation's largest fixed-line and broadband service provider, is poised to stage a marketing blitz to publicize its new brand, "QOOK," prompting a showdown among its rivals in the wake of the upcoming merger with its mobile telecom subsidiary, KTF.
An advertisement with an extraordinary nuance reads, "A big problem awaits you when you are away from home," heralding the onslaught of a new storm in the local fixed line business. The eye of the storm is the QOOK brand that KT strives to employ as its new brand for the fixed line business. KT released the brand on April 13.
KT is bracing for a showdown in the mobile telecom market in the wake of the May establishment of a new company combing itself and KTF. KT, a juggernaut in the fixed line business, is also poised to launch a new offensive.
KT cleared the last hurdle in its bid for consolidating with KTF as its shareholders approved the merger at an extraordinary shareholders' meeting held at the KT Research Development Center in Seoul on March 27. The move came as the Korea Communications Commission (KCC) gave the green light for the deal on March 18.
KT's brand strategy is apparently designed to promote its standing as the best total-solution provider of combination products, not an individual product provider. KT's latest move is expected to touch off a new showdown among the providers, as SK Telecom's "T," KTF's "SHOW," and LG Telecom's "OZ" are engaged in a fierce brand competition in the mobile telecommunication field.
KT now has a brand for most products, such as Ann for fixed-line phone service, Mega-Pass for broadband service and Mega-TV for IPTV service, but no representative brand for covering all KT fixed-line service products. If the unified brand QOOK is introduced, KT's home phone, Mega-Pass and Mega-TV will change into QOOK Phone, QOOK Internet, and QOOK TV.
QOOK, deriving from the word "cook," means that diverse broadcasting and communications services, including telephone, broadband Internet and IPTV can be managed with ease, KT officials said. KT's combined brand strategy can be interpreted as an attempt to make an aggressive foray into the combination product service market, industry sources said. Han Hoon, chief of KT's Home Customer Strategy Office, said, "As combination products are on the rise, the telecommunications sector is shifting the competition paradigm toward a total service provider structure, departing from an individual product-oriented one.
The new brand QOOK was made known to the public recently through SkyView, the map service of the portal site, Daum, which showed a picture of a banner carrying the brand, prompting attention from netizens, which put the name of the brand at the top of the Internet search words list.
KT Chairman Lee Suk-chae ordered about 36,000 "QOOK" banners to be distributed to staff members to be put on such places as the verandas of their houses in a move to publicize the brand. Lee himself put up the brand banner at his apartment in Songpa-gu, Seoul.
KT is to embark on a QOOK advertisement offensive designed to showcase the strengths of KT's fixed-line services. This is in keeping with a move not only to solidify the No.1 position in broadband Internet and other fixed-line services, but also to raise its market share in the emerging Internet telephony Voice over Internet Protocol (VoIP) and IPTV markets.
KT aims to rake in 7 trillion won in sales during 2009 by setting targets of raising the number of Internet telephony and IPTV subscribers to 2 million and 1.7 million, respectively. The latest move is seen as a strategy to keep intact the 20 million home telephone subscriber foundation plus Internet telephony subscribers by minimizing the rising breakaway of home telephone subscribers. KT plans to keep intact KTF's mobile brand, SHOW. The company is to release in late April or early May "QOOK & SHOW," a new product combining fixed-line and mobile communications services in order to make the most of the merger with KTF.
Following the KCC's approval of KT's merger with KTF, the merger process is officially due to be completed by May 18.
KT serves about 90 percent of the country's fixed-line telephone subscribers and nearly 45 percent of high-speed Internet users. KT's consolidation with KTF, which controls more than 30 percent of wireless subscribers, will allow KT to become the country's ninth largest conglomerate with 19 trillion won (about $13 billion) in revenue and nearly 24 trillion won in assets.
In giving the go-ahead to the merger, the KCC ruled that KT should make its telephone and broadband networks more accessible to rival telephony carriers and Internet companies.
The company must also make it easier for its fixed-line customers to switch to other carriers under number portability, which allows them to keep their old numbers, and invest further in the government-backed wireless Internet technology, WiBro (wireless broadband), a Korean version of mobile WiMAX. Its rivals, including SK Telecom, the nation's biggest mobile telephony carrier, and LG Group's three telecommunications units ¡ª LG Telecom, LG Dacom and LG Powercomm ¡ª have voiced their opposition to the upcoming juggernaut. They maintain that KT should be required to separate its network business as a precondition for the merger, claiming that KT's massive fixed-line infrastructure deprives them of a fighting chance when the company leverages its dominance to the wireless sector. nw
KT, Brilliant Records
Both KT and KTF, the two large communications firms slated to be merged on June 1, posted their largest quarterly performance results in their histories for Q1 2009. KT, for one, recorded 384.4 billion won in operating profit in the quarter, up 15.4 percent YoY, the telephone company said recently.
Its affiliate KTF also generated 243.4 billion won in operating profit, the largest in its history, the company said. KT recorded quarterly sales of 2.77 trillion won, down 6.5 percent YoY due mostly to reductions in fees related to phone calls and the transfer of cell phone calls for cable phones and cable communications. KTF's service sales, on the other hand, rose 2.7 percent YoY to record 1.47 trillion won in the quarter, while total sales fell 3 percent YoY at 2.19 trillion won.
The rate of new subscribers for cable phones decreased at an increasing rate in the quarter, resulting in a deficit of 21.1 billion won, a drop in inter-city calls of 29.1 billion won, and a decrease in international calls of 11.6 billion won. The only bright spot in phone service revenue was a large increase in the number of new subscribers of Internet telephone service, up 305.7 percent YoY, or 31.3 billion won in total fees. Qook Internet phone service only fell 3.1 percent from the preceding quarter owing to the intensive ads on TV, discounts on long-term subscribers and a special discount on repair costs for consumers.
Qook TV, a strategic business, since its launch in the middle of November 2008, had an increase in subscribers to 153,000 on a real time basis, posting 19.9 billion won in sales, up four-fold from the same period last year. KT currently operates 53 channels with a plan to add a number of sports channels in the first half, which will help increase the number of subscribers. The popularity of the Wibro Notebook also helped increase the number of subscribers to bring its first quarter sales to 27.5 billion won, up 34.3 percent over the previous year. The Qook set, which will include Internet, home phones and mobile phones, is expected to see the number of subscribers increase continuously from the current 2.19 million and it is likely to increase faster when KTF's distribution channels are used.
KTF, in the meantime, saw its subscribers increase by 180,000 in Q1 to bring the total number to 14.55 million, of which 9.23 million were 3G (SHOW) subscribers. Outstanding features of their performance results are a decrease in sales with an increase in operating profit. The "surprise results" led to boosts in the two communication giants' share prices in the stock market, 1.66 percent for KT and 1.85 percent for KTF. An analyst with Woori Investment and Securities said the two companies saved costs to beat estimates and appear to have more room for future such performances, explaining the outlook for the two companies. The consensus estimate was 330 billion won in operating profit for KT and 190 billion won in operating profit for KTF, far below the actual results.
Both companies were able to cut marketing expenses a great deal in the quarter with KT cutting 241.5 billion won and KTF 374.7 billion won, 26 percent and 18.6 percent respectively, compared to the same period last year. Less competition in securing subscribers in the quarter weighed heavily in savings in marketing expenses, the analyst said. They also saved on personnel expenses, with KT shaving off 12.5 percent and KTF trimming 5.3 percent during the first quarter. Cho Hi-joon, chief financial officer of KTF, said the improvement in the performance results can be attributed to savings in marketing and other expenses with the merger of KT and KTF to be completed on June 1, and overcoming the reduction in sales caused by discounts in fees with the expansion in the number of subscribers of WCDMA, which boosted the growth of data sales.
Kim Yon-hak, CFO for KT, said the new CEO, all officers and staff, who are working hard for the merger of the two communications titans, have made the move go smoothly, at a lower cost than earlier estimated. The successful merger will bring more stability and maximum synergy to satisfy various expectations placed on the merger. nw
(top) KT Chairman Lee Suk-chae announces the approval to merge KT and its subsidiary KTF during a shareholders meeting on March 27. KT released its
united brand "QOOK" in a marketing blitz to make the most of the merger.