KT, Shinhan form $370 mn digital alliance

South Korea's leading telecom operator KT Corp. has entered into a strategic alliance with the country's No. 2 lender Shinhan Bank, involving a $370 million cross-shareholding agreement, in a step toward "going beyond the limits of technology and financial services."

Their partnership is aimed at jointly launching various digital financial services and non-financial services such as electronic document management, the two companies said on Monday. They will also work together for overseas expansion.

It also marked the largest-ever strategic cooperation between the companies in the information and communications technology and financial services sectors, and underscored the trend of cross-industry alliances to take the lead in new business areas such as artificial intelligence (AI) and the metaverse digital space. 

"This strategic alliance is not mere cooperation. By combining finance and technology, we expect to go beyond our horizons and transform into digital companies," Shinhan said in a statement.

In detail, they agreed to cooperate on a total of 23 new business areas, utilizing KT's technologies in the fields of AI, metaverse, non-fungible tokens, big data and robotics, in addition to telecommunications infrastructure. 

In return, Shinhan Bank will share its financial data accumulated in the sectors of banking, brokerage, credit card and asset management, as well as the life and non-life insurance services.

"Our joint platforms will deal with metaverse-based convergence services, real estate and certified electronic document management among others ... using KT's blockchain technology," Shinhan said.

KT expects a combination of its AI capabilities such as data analysis and natural language processing and Shinhan's financial data will create a marketable business model to set them apart from rival companies, while improving their business efficiency and customer convenience. 

CROSS-SHAREHOLDING

To solidify their long-term partnership, the two agreed to purchase a stake in the other, each worth 437.5 billion won ($370 million). 

KT will be buying 11.1 million shares in Shinhan Financial Group for 437.5 billion won ($370 million) to take a 2.08% stake in the bank's parent company later this month, according to its regulatory filing on Monday.

Unlisted Shinhan Bank has already secured a 5.46% stake in KT for the same amount as of Jan. 17, according to its public disclosure.

VENTURE CAPITAL FUND

Additionally, both sides will create a joint venture capital fund to invest in domestic and overseas startups and provide them with consulting services.

They will also launch a task force for joint research and development on fintech services and additional joint projects, staffed by KT's specialized engineers and Shinhan's financial experts.

"Ultimately, the companies will jointly explore global platform businesses and together make a digital transformation," Shinhan said, adding that the alliance is part of its efforts to offer an easier-to-use, comfortable and newer financial service.

As an example, they will roll out converged telecoms and financial services targeting small business owners by developing their credit rating model. They are also studying specialized products for the MZ generation, which encompasses millennials and Generation Z, or those born between 1980 and the early 2000s.

After their various joint digital financial services succeed, the companies will work together to develop global platform services, KT said, without elaborating further.

"The two companies are not in one-off business cooperation, but in a cross-shareholding agreement with a long-term perspective," said Heungkuk Securities research head Hwang Sung-jin.

"If they create synergy from their business combination, they will secure a competitive edge in fintech and platform-based businesses."

Write to Han-Gyeol Seon and Dae-Hun Kim at always@hankyung.com
Yeonhee Kim edited this article.