December 2, 2022

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Kakao shares slump as outage sparks calls for regulatory scrutiny By Reuters

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© Reuters. FILE Photo: The Kakao messaging software and the Kakao T taxi booking application are seen on a cellular telephone in this illustration photo March 13, 2018. REUTERS/Thomas White/Illustration

By Joyce Lee

SEOUL (Reuters) -Shares of South Korea’s Kakao Corp plunged on Monday just after a widespread outage in the country’s major mobile chat app triggered a sharp political backlash and calls for improved scrutiny on the firm’s market place dominance.

The outage was induced by a fire at a data centre south of Seoul on the weekend and whilst units experienced largely been restored by Monday, disruptions to a array of related companies from payments to taxis and cafe bookings have raised issues about general public reliance on the application.

President Yoon Suk-yeol stated on Monday that Kakao’s solutions are “like a essential nationwide telecommunications community as considerably as the general public is anxious,” and promised adhere to-up measures over the support outage.

“If the market place is distorted in a monopoly or extreme oligopoly, to the extent where it serves a equivalent perform as countrywide infrastructure, the federal government must choose vital steps for the sake of the people,” Yoon additional, noting South Korea’s antitrust watchdog would analyze the make a difference.

Kakao shares plunged more than 9% on Monday to their least expensive considering that May well 2020, while shares in Kakao affiliates KakaoPay and KakaoBank also plunged far more than 8% in morning trade.

South Korea’s science and know-how ministry is probing no matter whether the outage violated any legal guidelines although the communications regulator is examining the matter, including the issue of compensation for end users, government officers reported on Sunday.

A Kakao spokesperson advised Reuters on Monday core providers these types of as messaging had been back on the internet, although some slight purposes were even now remaining restored.

“Fundamentally it is really a free of charge service and how compensations will get the job done for compensated companies is ambiguous, but it truly is remaining viewed as a countrywide interaction community, not a personal a single,” explained Choi Yoo-june, analyst at Shinhan Economic Corp. “Parliament audits are ongoing proper now, and it’s likely to spread to the situation of platform monopoly regulation.”

Law enforcement and the National Forensic Company are conducting a second investigation on Monday at the info centre, which is operated by SK C&C.

Just after an preliminary probe on Sunday, police claimed electrical problems all over battery racks in 3rd basement floor of the knowledge centre may well have prompted the fire.

REPUTATIONAL Strike

Kakao’s messenger app Kakao Discuss has much more than 47 million active accounts in South Korea and 53 million globally, the organization stated in a report in August, making it one particular of the most ubiquitous applications in the region of 51.6 million.

Kakao is not expected to undergo a huge money hit from payment, but the reputational hit and long term blowback is what matters if firms and customers request to lessen their reliance on Kakao, analysts claimed.

“Assuming that the harm compensation vary is minimal to paying out consumers, the impact on operating revenue is estimated to be about 12 billion won,” reported Kim Jin-woo, analyst at Daol Financial investment & Securities. “What is significant would be consumer traffic trends right after comprehensive services recovery.”

Kakao claimed 330 billion won ($229.74 million) in running financial gain all through the initially 50 % of 2022.

It said in a regulatory submitting on Monday that right after it normalises companies, it will focus on payment with knowledge centre operator SK C&C for losses sustained by Kakao and its critical units.

Kakao claimed on Sunday though its servers are distributed across four facts centres, the hearth-strike knowledge centre housed 32,000, or the key share, of its servers, which missing power and were ruined as a outcome of the blaze.

“32,000 servers currently being down… is unparalleled, and brought on difficulties in responding,” Yang Hyun-search engine marketing, vice president at Kakao told reporters on Sunday, introducing there was no details loss due to storage again-ups.

A Kakao spokesperson declined to offer the total number of servers it uses, citing security fears.

($1 = 1,436.2700 won)

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