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

© Reuters. FILE Photograph: The Kakao messaging software and the Kakao T taxi reserving application are seen on a cellular phone 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 soon after a common outage in the country’s greatest cell chat app activated a sharp political backlash and calls for elevated scrutiny on the company’s market dominance.

The outage was caused by a fire at a knowledge centre south of Seoul on the weekend and although methods had primarily been restored by Monday, disruptions to a assortment of related products and services from payments to taxis and cafe bookings have raised questions about public reliance on the application.

President Yoon Suk-yeol reported on Monday that Kakao’s providers are “like a fundamental national telecommunications network as far as the public is concerned,” and promised observe-up steps more than the company outage.

“If the marketplace is distorted in a monopoly or extreme oligopoly, to the extent exactly where it serves a comparable functionality as countrywide infrastructure, the govt ought to get essential measures for the sake of the men and women,” Yoon additional, noting South Korea’s antitrust watchdog would examine the issue.

Kakao shares plunged a lot more than 9% on Monday to their lowest due to the fact May well 2020, although shares in Kakao affiliate marketers KakaoPay and KakaoBank also plunged extra than 8% in early morning trade.

South Korea’s science and technological innovation ministry is probing irrespective of whether the outage violated any regulations when the communications regulator is reviewing the make any difference, like the issue of compensation for buyers, government officials reported on Sunday.

A Kakao spokesperson explained to Reuters on Monday main providers these kinds of as messaging had been back again on the net, despite the fact that some small apps ended up even now getting restored.

“Basically it can be a cost-free services and how compensations will operate for paid out services is ambiguous, but it’s being viewed as a national communication community, not a non-public a single,” stated Choi Yoo-june, analyst at Shinhan Financial Corp. “Parliament audits are ongoing appropriate now, and it can be probably to unfold to the concern of system monopoly regulation.”

Police and the National Forensic Services are conducting a 2nd investigation on Monday at the data centre, which is operated by SK C&C.

Immediately after an original probe on Sunday, law enforcement said electrical troubles about battery racks in third basement floor of the facts centre may have brought about the fireplace.


Kakao’s messenger application Kakao Talk has a lot more than 47 million lively accounts in South Korea and 53 million globally, the enterprise explained in a report in August, producing it one of the most ubiquitous apps in the country of 51.6 million.

Kakao is not envisioned to experience a massive fiscal hit from payment, but the reputational strike and potential blowback is what matters if companies and consumers request to minimize their reliance on Kakao, analysts stated.

“Assuming that the injury payment array is limited to paying out people, the result on functioning earnings is believed to be about 12 billion won,” stated Kim Jin-woo, analyst at Daol Financial commitment & Securities. “What is vital would be consumer targeted traffic developments immediately after whole provider recovery.”

Kakao noted 330 billion received ($229.74 million) in functioning revenue for the duration of the first half of 2022.

It stated in a regulatory submitting on Monday that just after it normalises services, it will talk about compensation with knowledge centre operator SK C&C for losses sustained by Kakao and its vital units.

Kakao said on Sunday whilst its servers are distributed across four data centres, the fire-hit knowledge centre housed 32,000, or the most important share, of its servers, which lost power and were being harmed as a result of the blaze.

“32,000 servers being down… is unparalleled, and brought about problems in responding,” Yang Hyun-search engine marketing, vice president at Kakao instructed reporters on Sunday, including there was no data decline owing to storage again-ups.

A Kakao spokesperson declined to offer the overall number of servers it utilizes, citing protection worries.

($1 = 1,436.2700 received)

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