en.Wedoany.com Reported - After Park Yun-young took over as CEO, KT announced its transformation into an "AI Transformation (AX) Company," but has encountered difficulties in executing the partnership project signed with Microsoft under former CEO Kim Young-sub. This five-year contract, valued at approximately 2.4 trillion won, still has over three years remaining and has become a significant burden for the new management team.
In September 2024, former CEO Kim Young-sub signed a joint investment contract with Microsoft to build a Korean-style AI and cloud ecosystem. KT aimed to leverage Microsoft's technology to quickly capture the domestic AX market, while Microsoft sought to expand its influence in South Korea through KT's customer base in the telecommunications, public, and financial sectors.
One year into the collaboration, the two companies launched the Korean-style AI model "SOTA K" in September 2025. Based on OpenAI's GPT-4o, this large language model was intensively trained on Korean language and historical data. During development, KT was responsible for data quality management, model evaluation, and the "responsible AI" domain, while Microsoft provided technical platform support.
SOTA K's market performance has fallen short of expectations. OpenAI subsequently released a series of next-generation models, and due to SOTA K's heavy technical reliance on OpenAI, it was quickly perceived by the market as an older-generation product after its launch, raising questions about its competitiveness and differentiation. Industry insiders revealed that OpenAI had already unveiled GPT-5.0 a month before SOTA K's launch, released GPT-5.1 in November of the same year, and GPT-5.2 in December. Currently, SOTA K is primarily used internally by KT. In response, KT stated that the partnership with Microsoft is still progressing, and specific matters such as service discontinuation for SOTA K have not yet been determined.
Setbacks have also emerged in the cloud strategy. Leveraging the partnership with Microsoft, KT began a large-scale migration to Microsoft Azure to replace its self-developed cloud system. The "Secure Public Cloud (SPC)," launched in November 2025, was designed based on the premise that the National Intelligence Service would relax security standards. However, the related regulatory overhaul has been postponed to 2027, creating a disconnect between the initial plan and the actual regulatory environment. The CEO change and board issues further delayed the response speed. Additionally, the joint talent development program has been criticized as superficial, offering content not significantly different from Microsoft's standard technical education for its global partners. Some industry observers commented that instead of fostering a domestic AI ecosystem, KT is funneling communication revenue from domestic users to a global tech company.
The unfairness of the contract terms is a core issue for KT. The contract details have never been made public, leading to external speculation that it contains poison pill clauses unilaterally unfavorable to KT. Rumors suggest the contract imposes strict legal liabilities on KT for failing to meet its obligations to Microsoft, while Microsoft can avoid responsibility even if it fails to fulfill its commitments. Controversy over data sovereignty infringement is also heating up: if KT's core computer systems (BSS, OSS), customer consultation records, communication failure logs, and other data from the national basic communication network are migrated to Microsoft's cloud, they could be subject to requests from the U.S. government under the CLOUD Act.
This issue became a focal point during the comprehensive audit by the National Assembly's Science, ICT, Broadcasting, and Communications Committee. Former CEO Kim Young-sub explained at the time that the contract does not allow the U.S. government to arbitrarily access or take data, and that unused cloud products within the five-year period have been adjusted through contract extensions. He argued that Microsoft Azure's technology is superior to KT's self-operated cloud, making this a necessary investment to strengthen competitiveness. However, the new management team faces a dilemma: terminating the contract early or forcibly renegotiating terms could lead to legal disputes and massive penalties; maintaining the contract would see large annual payments to Microsoft drain the funds needed for Park Yun-young's envisioned strategy of building an independent AX platform company.
Choi Kyung-jin, President of the Korean Society of AI Law and a professor at Gachon University, pointed out that it is difficult to judge fairness without seeing the contract's contents, but a CEO change typically does not constitute grounds for altering an inter-company contract. He added that whether to develop an in-house model or partner with Microsoft is a choice of the management team and is hard to evaluate unilaterally. An anonymous AI startup representative stated that choosing Microsoft as a partner is the core issue; Microsoft's AI position has become ambiguous after its relationship with OpenAI deteriorated, leaving KT in an awkward position. Another industry insider predicted that the CEO change has left internal employees directionless, and with three years remaining on the contract, the new team lacks effective countermeasures, suggesting the situation may remain stagnant.
This article is compiled by Wedoany. All AI citations must indicate the source as "Wedoany". If there is any infringement or other issues, please notify us promptly, and we will modify or delete it accordingly. Email: news@wedoany.com
