KT and Kakao recorded 'record-breaking results' in the second quarter of this year, but they have yet to produce significant achievements in the field of artificial intelligence (AI), which is considered a future growth area in the information and communication technology (ICT) sector. Both companies seem conscious of this perception, as they presented an 'AI business blueprint' during their second quarter earnings conference call, but there are still question marks in the market.
According to industry sources on the 16th, KT and Kakao are overcoming the absence of their own AI technology through collaboration with overseas big tech companies. KT announced a collaboration with Microsoft (MS) last June, aiming to work together in the AI, cloud, and IT sectors over five years with a scale of 2.4 trillion won. Kakao also formalized its partnership with OpenAI, the developer of ChatGPT, in February.
However, neither company has yet launched a killer service that general consumers can feel. In the telecommunications industry, SK Telecom operates the AI assistant service 'adot,' which has 9.8 million users, while LG Uplus has commercialized a currency AI app called 'Exio.'
Chang Min, KT's Chief Financial Officer (CFO), stated, "We continue to develop products based on our collaboration with MS," and revealed plans to launch a Korea-specific AI model using confidential computing technology (ACC) in the second half of this year. He also noted that they will present a full AI lineup, including a security cloud and a large language model (LLM) called 'K-ChatGPT,' in the latter half of the year.
In Kakao's case, they launched the AI service 'Kanana' in a pilot service form through collaboration with OpenAI last May. Released as a separate app, this service was designed as an 'AI mate' that understands the context of conversations exchanged by users and provides tailored responses. According to mobile index, a statistical analysis platform for apps, the monthly active users (MAU) of Kanana started at 69,631 in May, but decreased to 24,903 in June and 16,997 in July.
Chung Shina, CEO of Kakao, said, "From this second half of the year, AI services with the most users globally (ChatGPT) and the most dominant mobile platform in Korea (KakaoTalk, etc.) will meet and quickly preoccupy the B2C AI service market for Korean consumers."
An anonymous securities analyst commented on KT and Kakao's AI strategy, saying, "They raised market expectations by announcing collaborations with global big tech companies, yet by setting the service launch for 'the second half of this year,' they are falling short of investors' and consumers' expectations." They further added, "In a situation where both domestic corporations and global big tech companies have seized the Korean AI service market, they have missed the opportune time for business expansion."
◇ KT's AI business proportion is still minimal… Kakao has not disclosed AI performance
The absence of AI strategies from KT and Kakao was also evident in their second quarter results. Although both companies achieved revenue growth during this period, they were unable to post significant achievements in the AI business sector.
KT recorded consolidated revenues of 7.4274 trillion won and operating profit of 1.1148 trillion won in the second quarter of this year. The operating profit increased by 105.4% compared to the previous year. By surpassing the performance of SK Telecom (operating profit of 338.3 billion won), which saw a decline due to a hacking incident, KT rose to the top position in the telecommunications industry for the first time since the first quarter of 2022.
However, the revenue from KT's AI infrastructure-related business (on a separate basis) was only 317.6 billion won, a 13.8% increase from the previous year. Although they publicly assert a 'transition to an AI corporation,' the proportion of the AI business in total revenue stands at only 6.7%.
Kakao also saw consolidated revenue increase by 1%, reaching 2.0283 trillion won, with operating profit rising by 39% to 185.9 billion won in the second quarter. Both revenue and operating profit achieved record highs for the quarter.
However, Kakao does not separately disclose revenue related to AI in its performance. Instead, it combines revenues from the enterprise sector, where AI-related businesses are conducted, with mobility, payments, and other sectors, labeling them as 'other platforms.' This is in contrast to its competitor Naver, which began reporting AI-related revenue under the enterprise sector since the first quarter.
An industry source noted, "The revenue structure typically revealed during performance announcements reflects the direction and confidence in the company's ability to generate results, and there might be reasons for Kakao to conceal its AI revenue."
◇ Collaboration with global big tech has a negative impact on the selection of national AI
The establishment of collaboration systems in the AI sector between KT and Kakao with MS and OpenAI is cited as a reason for their exclusion from the government's 'independent AI foundation model' development project. Both companies formed teams to challenge the 'national AI model' development project, but they did not make it to the list of the five elite teams that were prioritized during the first evaluation (Naver Cloud, SK Telecom, LG AI Research Institute, NC AI, Upstage).
The elite teams will receive over 200 billion won in financial support, including 15 billion won for high-performance graphics processing unit (GPU) lending, 62 billion won for joint purchasing and dataset construction and processing, as well as 25 billion won for recruiting research and development personnel and labor costs. They will also be able to use the designation of K (Korean)-AI models or K-AI corporations publicly.
Yoon Seok-bin, a special professor at the Graduate School of AI and Software at Sogang University, stated, "KT and Kakao's promotion of AI collaborations with global big tech companies is likely to have negatively impacted the selection of K-AI, which emphasizes sovereignty. While it's not necessarily a wrong choice to collaborate with these companies, the issue lies in the fact that current market values are not emerging."