KT, which is under investigation over a hacking incident, is being pushed into a corner as bad news piles up. On top of the Ministry of Science and ICT and the Personal Information Protection Commission, the Korea Media and Communications Commission has also signaled it will join the probe into the hacking case.
At a National Assembly confirmation hearing on the 16th, Korea Media and Communications Commission Chairperson Kim Jong-chul said the commission will investigate whether KT violated the Telecommunications Business Act. Kim said, "Within the scope of our authority, we will make it a top priority to investigate whether KT committed any acts prohibited by the Telecommunications Business Act."
KT discovered 43 servers infected with malware between March and July last year but did not report them to the Ministry of Science and ICT. In particular, after SK Telecom's hacking incident in April this year, KT gave a briefing highlighting its own security competitiveness. In July, KT stressed that operating its in-house security network, "K-Security Framework," enables rigorous control over the entire process of protecting customer personal information. The issue is that such conduct could fall under "deceptive practices against customers," which are prohibited by the Telecommunications Business Act. If a violation of the Telecommunications Business Act is confirmed, the company could face business sanctions, such as a ban on signing up new users for up to three months.
In this environment, the government's push for punitive penalty surcharges is also expected to indirectly weigh on KT. On the 15th, the National Policy Committee passed an amendment to the Personal Information Protection Act that would allow penalty surcharges of up to 10% of total sales on corporations that cause serious personal information breaches or repeated breaches. Previously, surcharges could be imposed up to 3% of total sales. Of course, it will be difficult to apply the amendment immediately to the KT hacking case. Personal Information Protection Commission Chairperson Song Kyung-hee also said it would be difficult to apply it retroactively to hacking incidents that occurred before the law was revised.
However, as the government and the National Assembly are clearly committed to punitive penalty surcharges, the industry expects this stance to be reflected in how surcharges are calculated. A telecommunications industry official said, "Even if they can avoid the revised law for now, if a hacking incident recurs later, the likelihood of punitive penalty surcharges being imposed becomes a burden," adding, "The chances have also increased that a surcharge of up to 3% of total sales, as stipulated by the current law, will be imposed." The penalty surcharge imposed by the Personal Information Protection Commission (PIPC) in August on SK Telecom for a personal information leak was 134.891 billion won, the largest ever. Last year, KT's mobile telecommunications revenue was about 7 trillion won, meaning the maximum penalty surcharge the PIPC could impose is about 210 billion won. That amounts to 11.5% of KT's operating profit last year (1.8118 trillion won).
Amid this situation, the government's upcoming decision on whether to waive termination fees for all subscribers could also weigh on KT. The Ministry of Science and ICT has said it will state its position on waiving termination fees after the final announcement of the hacking probe results. If termination fees are waived, concerns over a massive subscriber exodus are high, and many believe a swift response will be difficult due to a lack of leadership. Former KT President Park Yoon-young has been selected as the final candidate for the next CEO, but until approval at the shareholders' meeting in Mar., an effective management vacuum is likely to persist.
A telecommunications industry official said, "The decision on whether to waive termination fees will come before KT's next CEO is finally appointed. It is expected to come right after the joint public-private investigation team announces its final findings around Jan.–Feb. next year," adding, "If the waiver decision is made while leadership is vacant, the confusion will grow."