KT's stock price has surpassed 50,000 won for the first time in 15 years, exceeding the market capitalization of the leading telecommunications company, SK Telecom. The stock price has risen by more than 50% since CEO Kim Young-seop took office a year and a half ago. This is attributed to the 'Kim Young-seop magic' that has led collaboration in the AI business with global big tech companies like Microsoft (MS) and focused on workforce restructuring and enhancing shareholder value policies.
On the 19th, KT's stock price reached 50,700 won, surpassing 50,000 won for the first time in 15 years. On that day, KT's market capitalization was 12.77 trillion won, which was about 600 billion won more than its competitor SK Telecom's market capitalization of 12.18 trillion won.
Since CEO Kim's appointment, KT's stock price has shown a steady upward trend. At the end of August 2023, when Kim took office, KT's stock price was 33,050 won, but it has risen by approximately 54% over the past year and a half. During the same period, SK Telecom's stock increased by 17.3%, while LG Uplus saw a 3% rise. What explains the significant increase in KT's stock price among the three major telecommunications companies?
The industry views that the workforce restructuring and shareholder value enhancement policies implemented by CEO Kim have positively influenced the stock price. The existing workforce structure at KT had more than half of its employees over 50 years old. Kim restructured 4,400 older employees through voluntary retirement and the establishment of subsidiaries. Although last year's operating profit significantly decreased compared to the previous year due to a large retirement expense of around 1 trillion won, this is expected to lead to labor cost savings starting this year, which has positively impacted the stock price.
The corporate value enhancement plan (Value-Up Program) announced by Kim in November last year also contributed to increasing the stock price. At that time, Kim promised to raise KT's return on equity (ROE) based on the consolidated financial statements for 2028 to between 9% and 10%. An increase in ROE implies improved corporate profitability, which in turn raises the value of company capital and can increase dividends, thereby enhancing shareholder value. At the time of the Value-Up Program announcement, KT's ROE was in the 6% range. Kim also revealed plans to buy back and retire shares worth a total of 1 trillion won by 2028 as part of the Value-Up Program, an amount sufficient to retire about 9.5% of KT's total shares.
As this news became known, in November last year, the foreign ownership ratio reached the maximum limit of 49% for the first time in five years since October 2019 and has remained at that level. This figure is higher than the foreign ownership ratios of SK Telecom (42%) and LG Uplus (34%). At the time Kim took office, KT's foreign ownership ratio was 40%. An unusual phenomenon also occurred where KT shares, which were circumventing legal restrictions for foreign investors, traded at a premium of around 5%.
The push for AI business through collaborations with overseas big tech companies like MS and Palantir has also positively impacted the stock price. Kim has consistently emphasized that the company's fate rests on 'AI Transformation (AX).' In June last year, KT signed an agreement for AI and cloud business collaboration with MS, committing to a joint investment of 2.4 trillion won over five years to develop Korean-style AI models and services and Korean-style cloud services. On the 12th of this month, KT secured a new AX business partner by signing a memorandum of understanding with the American AI software company Palantir. Global consulting firm KPMG forecasts that the revenue KT generates from the AX business will increase from 269 billion won in 2025 to 1.37 trillion won by 2029, a fivefold increase.
Ryu Jong-ki, an executive at EY Han Young, noted that "the over 50% rapid increase in KT's stock price among the three telecommunications companies is a result of the 'Kim Young-seop magic' focused on enhancing shareholder value" and added, "It is expected that SK Telecom and LG Uplus will also proactively seek ways to enhance shareholder value, following KT's lead."