Labor-management conflict erupting among Telco

The three major mobile carriers have recently been struggling with labor union issues. As both sides strive to expand their artificial intelligence (AI) competitiveness, concerns are being raised that internal conflicts could inadvertently lead to a weakening of external competitiveness. A cellphone store in downtown Seoul on April 9. / News1 According to industry sources on the 28th, the three major telecom companies—SK Telecom, KT, and LG Uplus—are currently negotiating with labor unions or clashing over issues such as subsidiary sales, wage increases, retirement age extensions, the abolition of the wage peak system, and including personal incentives (PI) in the average wage calculation. SK Telecom is facing backlash from the SK Stoa branch of the SK Broadband Labor Union as it pushes to sell its subsidiary SK Stoa to Rapo Labs. The SK Stoa branch claimed that SK Telecom is trying to reduce the burden of acquiring Rapo Labs by holding a 20–30% stake in SK Stoa. The labor union criticized this method of sale, saying it could undermine the public interest required in the process of acquiring a broadcasting operator. KT is conducting negotiations with the labor union over wages and working conditions. KT’s First Union presented collective bargaining demands including a flat 6% wage increase, employee stock ownership payments, abolition of the wage peak system, and retirement age extension aligned with the timing of national pension benefits. The second union demanded a reduction in working hours, including the introduction of a 4.5-day workweek, and protection for workers during the transition to AI. The demands also included coexistence with group companies and partner firms, workers’ participation in management, and improvements to corporate governance. The LG Uplus labor union is recruiting union members to join a lawsuit against the company, demanding that PI be included in the average wage calculation. The union demanded an 8% increase in total wages this year and a plan to pay 30% of operating profits as performance bonuses. The demands also included the payment of 2 million won each for 200 employee shares and holiday bonuses. They also demanded a 35-hour workweek without wage cuts and an extension of the retirement age to 65. The reason labor-management negotiations among the three major telecom companies are drawing attention is that they coincide with a period of restructuring the business around AI. As the mobile telecommunications market enters maturity, the three major telecom companies are developing new growth engines such as AI data centers (AIDC) and B2B AI businesses. To this end, it is expanding investments in building data centers and computing infrastructure, as well as securing AI talent. KT plans to invest 5 trillion won over the next five years to secure AI data center infrastructure with a capacity of 1 gigawatt (GW). LG Uplus is also expanding related investments, including building a large-scale AI data center in Paju. SK Telecom has designated the AI data center as a core growth business and is expanding its domestic and international operations. Along with expanding their AI businesses, the three telecom companies are also changing their organizational and personnel structures. To increase the share of AI business in the existing mobile-centric business structure, it is necessary to secure specialized personnel in new fields while also reallocating existing staff. In this process, measures such as reducing working hours, extending the retirement age, and reforming the wage system could affect future workforce management and cost structures. The union’s demands for wage increases and improvements in working conditions are part of the annual process of wage and collective bargaining. However, this year the scope of demands expanded beyond wages to include matters related to the company’s business and workforce management, such as the sale of subsidiaries, retirement age, working hours, and worker protection during the AI transition process. A telecom industry official said, “It can be seen as a process in which the union first raises its demands higher than initially proposed and then negotiates with management. However, if both sides fail to find common ground on the key issues, the labor-management conflict could drag on for a long time.” Professor Kim Dae-jong of Sejong University’s Business Administration Department said, “Since the controversy over performance bonuses at Samsung Electronics and SK Hynix, demands for union compensation and improvements in working conditions have been growing across the industry. In a situation where the three major telecom companies must increase investment to secure AI competitiveness, if conflicts over working conditions such as a 35-hour workweek drag on, they could lead to increased management burdens for companies.” fun3503@chosunbiz.com