KaKao's phone service hurts Korean telecom giants: Moody's

The launch of a free phone-call service by KakaoTalk is credit negative for South Korean telecommunication giants SKT and KT, Moody's Investors Service said Monday.

KaKaoTalk is a popular multi-platform texting application based in South Korea. It claims more than 50 million subscribers around the world.

The operator began the free phone service, VoiceTalk, on a trial basis last week.

Moody's said the move will cause the additional burden in the capital expenditure of SKT and KT due to an increase in data traffic.

It will also chip away at their revenues in the voice service, it added.

Many smartphone users with the data services of SKT and KT are already texting via KaKaoTalk.

The telecom firms allow smartphone users to use unlimited 3G data service for at least 54,000 won ($46), Moody's pointed out.

"We estimate that about 60 percent of smartphone subscribers from SK Telecom and 55-60 percent of such users from KT are, therefore, eligible to use VoiceTalk for free," Serena Won, an analyst at Moody's, said in a weekly credit outlook.

"A switch to greater use of VoiceTalk will threaten the telecom operators’voice market, which amounts to a key, but declining share of their revenue.”