At a recent KT board meeting, the board reportedly raised concerns about unfairness in the strategic partnership agreement KT signed with Microsoft (MS) in the United States and demanded a review. Some say it is an unfair contract because KT would bear legal liability for carrying out the agreement, while MS could avoid legal liability even if it does not fulfill its promises.
In Jun. last year, KT announced that it would build a Korea-style artificial intelligence (AI) and cloud ecosystem through a joint investment agreement with MS worth 2.4 trillion won. However, concerns have been raised about ambiguity in the contract terms because the two companies' respective investment shares and MS's obligations were not disclosed in detail.
According to the telecom industry on the 29th, at a KT board meeting held this month, some directors said the contract signed with MS was unfavorable to KT and demanded that KT President Kim Young-shub disclose the contract details. In particular, MS's contractual obligations were said to be vague, and the fact that only KT would bear legal liability emerged as a key point of contention.
A source familiar with KT said, "If KT does not fulfill what it promised to MS, it must bear legal responsibility, whereas MS structured the contract so it can sidestep legal responsibility even if it does not fulfill what it promised to KT," adding, "This is because KT has a 'MUST' clause, while MS has a 'BEST EFFORT' clause." The source continued, "For example, the contract includes language such as 'MS will endeavor to unify the network lines used in its domestic cloud business under KT,' so there is no legal way to compel MS to perform if it does not."
Some also say President Kim Young-shub may have pushed the contract with a global big tech company too aggressively to win another term. KT drew attention by saying that through collaboration with MS over the next five years until 2029, it would post cumulative sales of 4.6 trillion won in the AI business alone. After signing the contract with MS, KT's stock also rode a favorable wind and hit a record high. On Jun. 3 last year, when it signed the contract with MS, KT's share price was 37,250 won, but it jumped 59% to 59,200 won on Jul. 15, when it hit an all-time high.
Inside and outside the industry, many say that if the terms of the contract KT signed with MS in an unfair manner come to light, the Fair Trade Commission could step in. The commission has the authority to sanction acts by a market-dominant business operator that restrict competition or harm consumers. A legal source said, "If the contract between KT and MS is evaluated as an unfair transaction because MS's obligations are vague and only KT bears legal responsibility, it could be subject to review by the Fair Trade Commission," adding, "In particular, if the contract terms include discriminatory elements or abuse of market dominance, the commission could consider legal action."
KT denied this, saying, "It is not true that there is a difference between 'MUST' and 'BEST EFFORT' in the contract clauses. The mutual obligations of both companies are included." The company added, "We completed internal and external legal reviews related to the contract with MS and have communicated fully with the board before and after the signing."