Telecoms-Kakao conflict escalates over free call

S&P lowers KT’s rating to negative, citing threat from mVoIP service and other revenue sources


Local telecom giants and Kakao, well-known for its free mobile messenger service, have expanded their battle front amid the venture firm’s new allegation that the mobile carriers purposely downgraded the quality of its voice call service.

Earlier on Thursday, Kakao’s chief executive Lee Sir-goo said that the country’s three telecom companies -- SK Telecom, KT and LG Uplus -- are lowering the voice quality of its Internet call service named “Voice Talk” on purpose.

The firm, which is the owner of Kakao Talk which boasts a user base of about 42 million, claimed that the quality of the service has been getting worse from the third day it began the testing.

As proof to the statement, the voice data loss rate, monitored by Kakao itself, reached 51 percent for LG Uplus, 18.7 percent for SKT and 14.8 percent for KT, according to Kakao officials.

“This indicates that the mobile carriers have gone forward with the move to shut the service down,” said Lee. “They should not be banning their service’s subscribers from using the mobile Voice over Internet Protocol service since people are paying the fees for wireless Internet.”

However, the mobile carriers, which say Kakao has become the nation’s top telecom service, are stating that it is nonsense for them to block people from using the service since they allow the use of similar m-VoIP services for people who are subscribed to monthly payments of 54,000 won and up.

LG Uplus, the only telecom that said it would open up its networks for the free mobile call service, said Kakao was making a mistake in determining the data loss rate at such an early stage.

In the meantime, Standard & Poor’s Rating Service revised the outlook of No. 2 telecom KT to negative from stable in a related effort on Friday.

“We believe KT will face intensifying competition, uncertain regulatory conditions and continuous declines in revenue in its fixed-line voice business,” said Park Jun-hong, an analyst at S&P. “Also, we believe free mVoIP services such as Kakao Talk’s voice talk service could potentially threaten KT’s wireless and fixed-line voice revenues.”

The agency also said it expects measures of KT’s credit quality to remain weaker than those commensurating with the current ratings in the next six to 12 months.

The announcement takes place shortly after Moody’s Investors Service on Monday said the launch of a free phone call service by Kakao is credit-negative for SKT and KT.

Moody’s had claimed that the move will cause additional burden in the capital expenditure of the two local telecom giants due to increase in data traffic and chip away revenues in voice service.

Since launching the free mobile voice call service in Japan in February, Kakao has been introducing the service globally in other regions since May this year.

The service is currently in the test stage in Korea for it rolled out earlier than scheduled due to rising demand, a Kakao official said.

By Cho Ji-hyun (sharon@heraldcorp.com)