Morningstar Rating

Stock Research and Analysis

by Dan Baker

Bulls Say

Until 2013, KT generated solid free cash flow despite government intervention and strong competition. If new cost-cutting measures and asset sales are successful, this free cash flow (and resulting dividend) can be restored.
New management is addressing the cost base. An early retirement package in 2014 led to 8,300 people retiring and is expected to reduce total costs by over KRW 500 billion per annum. Capital expenditure was also cut more than 25% in 2014.
All telecom operators in Korea should benefit from the Handset Distribution Act, which was implemented in October 2014 and should reduce overall handset subsidies in the industry. Read more 

Bears Say

KT's fixed-line revenue declined 7% in 2014, and declines of similar magnitude are expected in the near future, with acceleration of this decline a possibility.
By expanding into non-telecom businesses, KT is moving away from its core competence and economic moat into more competitive businesses.
The potential entry of a fourth mobile operator could prove very disruptive to both pricing and margins in the mobile market. Read more 

Management

We rate KT stewardship as Standard. Capital-allocation decisions have been reasonable and the new management team is making sensible decisions, but previous management teams have been clouded with allegations of corruption.
Senior management at KT has   Read more 

Profile

KT Corp. is South Korea's largest fixed-line telecom operator, with 17 million customers. It is the largest broadband firm with 8.2 million customers, the second-largest   Read more 

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