Why did KT sell the freight transportation platform operator Lolab to Teamfresh?
💸 Read this article to find out!
- KT is selling its freight transportation subsidiary, Lolab, which operates the 'Brokarry' platform. The buyer is the logistics company 'Teamfresh,' which established Lolab in joint venture with KT. Last year, KT seemed serious about this market, buying up a large number of trucking licenses. What happened to KT after the appointment of the new CEO Kim Young-seop last year? We have summarized the opinions of stakeholders in the freight transportation market that were competing with KT Lolab.
- The best way to confirm the rumors circulating in the market is to ask the parties involved in the acquisition directly. Connectors contacted Lee Seong-il, the CEO of Teamfresh, who acquired Lolab. We were able to hear the full story behind the acquisition decision. Along with this, we found out what specific synergies Teamfresh and KT can gain through the Lolab M&A.
- Stakeholders in the freight transportation platform expressed regret over KT's decision. The freight transportation platform market has been the graveyard of numerous major corporations in the past. With KT stepping back, there are concerns that the industry might relive its past troubles. Some say that KT's sale of Lolab was a pre-planned step. Connectors looked into this evidence.
- Anyway, Lolab is not disappearing; the operator is simply changing. Brokarry will continue to function as a platform. KT remains on the list of major shareholders of Teamfresh, so it will still be able to exert indirect influence. Nevertheless, the industry predicts that the difficulties facing freight transportation platforms will continue. What are these challenges that even substantial capital and advanced technology cannot overcome?
CHAPTER 1
KT Steps Back from Telecom Transport Platform Competition
KT is selling its logistics subsidiary, Lolab, known for operating 'Brokarry', a platform that was among the freight transportation platforms of the three major telecommunications companies alongside T map Mobility’s T map Cargo and LG Uplus's Freight Connect. Up until last year, Lolab was actively enhancing its freight transport business by purchasing a significant number of commercial license plates, but suddenly decided to sell the business, drawing industry attention. Interestingly, the acquiring entity this time is Teamfresh, a logistics company that was established as a joint venture with KT, with Teamfresh investing 20% equity in Lolab.
It is also a logistics company that has received investment from KT. Lolab announced that it would conduct the sale through an exchange of shares with Teamfresh at a ratio of 1:0.01444, and starting from May 1st, Lolab is scheduled to become a subsidiary of Teamfresh. The reasons for the sale and acquisition, as stated by both companies, are "to utilize business synergies to enhance operational competitiveness." Teamfresh expects not only to expand its business scale with the acquisition of Lolab but also to digitalize logistics through Lolab's technology and talent. Until now, media reports on KT's sale of Lolab have generally not deviated from these explanations.
However, the logistics industry has interpreted KT's sale of Lolab as a step that was practically planned following the appointment of the new CEO, Kim Young-seop, last year. Of course, KT will continue to exert influence as a shareholder of Teamfresh after the sale, but explaining this merely as 'creating synergy' seems quite complex and intricate, with various other circumstances intertwined. This content summarizes how stakeholders in the logistics industry, including freight transport platforms and transportation companies competing with Lolab, view KT's sale of Lolab. Furthermore, we heard directly from Lee Seong-il, the CEO of Teamfresh, about the past actions of KT Lolab, the reasons behind the successful acquisition deal, and the specific synergies Teamfresh expects to create through the acquisition of Lolab.
CHAPTER 2
Was Lolab's Fate Predetermined?
Rumors had been circulating in the freight transportation industry since last year, well before the sale of Lolab was announced. With the appointment of Kim Young-seop as the new CEO of KT in August of last year, there was talk that Lolab could be significantly impacted depending on the new CEO's approach to profitability. As 2024 began, KT continued its restructuring efforts, and the sale of Lolab was seen as part of this ongoing process, according to industry insiders competing with Lolab.
“I heard internally at KT that there was skepticism about the logistics business. Given that freight transportation doesn't yield immediate results compared to the amount invested, it fell out of favor especially with the change in management. Particularly in the freight transportation market, significant cash flow is required to navigate both the visible and more obscure aspects of the industry, which was seen as a burden. It seems more likely that KT decided to streamline its investments towards AI and 6G technologies rather than continue with Lolab. Selling Lolab to Teamfresh, a stakeholder with clear interests, was probably seen as the smoothest way to handle this divestiture,” said Mr. A, a representative from a domestic freight transportation brokerage platform.
Another industry insider confirmed the notion that KT was expected to soon exit the freight transportation business. The reason, as previously mentioned, is that KT began reselling the freight vehicle license plates it had acquired at a premium, albeit at a significant loss.
The timing of KT's plate sales coincides with the appointment of the new CEO, Kim Young-seok, as mentioned by another transportation industry representative. This has led to industry speculation that the new CEO’s leadership influenced Lolab's sudden exit. A KT representative also indicated that "the new CEO sold Lolab in the context of cleaning up the previous CEO's ventures."
“When KT was buying the commercial license plates, they paid a price much higher than the going rate at that time, which was around 20 million won. It was so noteworthy that rumors spread among transportation companies about KT paying a premium for these plates, in batches of 200 to 300. When they put these plates back on the market, they sold them at what's commonly called ‘distress sale prices’. The transport companies that bought them back made a good profit because they sold them at a high price and bought them back cheaply. That move made it clear to everyone that KT was in a hurry to exit the freight transport business. It seemed like there was a special directive from above,” said Mr. B, a representative from a freight transportation company.
According to representatives from the transportation industry, it's true that KT had made significant investments in the freight transportation market before the appointment of the new CEO. However, the effectiveness of these investments may not have been satisfactory for KT. This assessment is linked to the closed nature of the freight transportation market. The market is still significantly influenced by "relational capabilities" that cannot be overcome solely with substantial capital, and "analog practices" that digital technologies alone cannot address. This mismatch with KT's ethos might have been a determining factor in their decision to divest.
A transportation company executive explained the reasons using two examples. First, traditional transportation companies often operate under a form of protection—not officially termed as such—where retired executives and their relatives are involved, creating entrenched power structures that are hard to break through with mere cost competitiveness. Even lesser-known small transportation companies can secure steady contracts if their leaders have connections with major shippers.
Second, expanding the network of truck owners also requires long-term operational capabilities backed by trust. For instance, incidents like the recent subcontractor payment defaults by Coupang highlight recurring issues within the industry where truck owners suffer financial losses. Therefore, truck owners value not just favorable freight rates but also trustworthy relationships with transportation companies. Similarly, brokers and transportation agents play crucial roles in resolving various field issues, a skill set that cannot be quickly acquired through technological investment alone.
CHAPTER 3
How Do Truck Owners Evaluate Brokarry?
We also listened to the perspectives of truck owners who used the Brokarry platform. Many truck owners expressed dissatisfaction with the number of orders and the rates offered on Brokarry, though there were positive comments about the promotions, such as fuel gift vouchers, which were well-received when available. However, outside of these promotional orders, there seemed to be little reason for them to continue using Brokarry.
Moreover, when dispatching on Brokarry was not smooth, the platform resorted to posting these orders on other platforms (freight information networks) for handling. This approach of requesting multi-level brokerage through competing platforms naturally did not sit well with the truck owners who encountered such orders.
Freight information network operators were also aware of Brokarry's operational style. According to one representative, there were doubts about Lolab's sustainability as a platform, and these concerns are not expected to change significantly even after Teamfresh's acquisition. Since Teamfresh, a logistics company, operates the transport platform, competing transport companies feel reluctant to participate, foreseeing limited scalability. If the volume of available freight does not expand, it will be challenging to satisfy truck owners as well.
“Operating a freight transportation brokerage platform requires a completely different set of skills than simply managing a transportation company and conducting business well. While Teamfresh is a veteran logistics company with long-accumulated capabilities, the feedback from truck owners who have used their platform ‘Yeochar Yeochar’ indicates that only orders limited to Teamfresh’s own cargo appear on it. Adding Lolab to their operations doesn’t seem likely to bring about significant changes. It seems that Teamfresh would need to operate Lolab in a completely different manner to differentiate it from existing systems. To compete with existing freight networks like 24-Hour Call Freight, Freight Man, or One Call, it will take a long time to gather a comparable network on the platform. This process is likely to involve considerable expenditure. Only then can it transform from a platform that merely handles in-house logistics with tools like a Transport Management System (TMS) to one that truly operates as an independent platform.” - Mr. C, a representative from a domestic freight transportation network.
CHAPTER 4
The Full Story Behind Teamfresh's Acquisition of Lolab
In fact, CONNECTUS had previously predicted through their content that the roles of KT Lolab and Teamfresh significantly overlapped, and that eventually, KT might acquire Teamfresh, leading to a merger with Lolab. At the time, Lolab was not only a freight transportation brokerage platform but also expanding into freight services and logistics center operations. Similarly, Teamfresh, which started with cold storage logistics and a pre-dawn delivery network, had launched the freight transport platform 'Yeochar Yeochar,' leading to increasing overlap in their business domains. Naturally, it was expected that KT, being the larger entity, might acquire Teamfresh, but the market has shown the opposite outcome.
Teamfresh clarified that the business domains of Brokarry, the transport platform operated by Lolab, and Teamfresh's Yeochar Yeochar do not overlap. While Brokarry strongly functions as a platform that brokers freight transport orders to truck owners, Yeochar Yeochar focuses more on providing services related to job scheduling, settlement, and other operational conveniences rather than merely matching truck owners with jobs. Post-acquisition, the two platforms will continue to operate separately, each focusing on its respective functions.
Moreover, Teamfresh revealed that it was not KT but Teamfresh itself that proposed the sale of Lolab. The reason behind this was that Teamfresh believed that acquiring Lolab could produce the desired outcomes, namely synergies, for both KT and Teamfresh. Lee Seong-il, CEO of Teamfresh, detailed these aspects further.
"KT initially wanted to focus on a logistics business that leveraged their extensive data to create solutions. However, they realized that solutions alone couldn't address all logistics challenges, so they participated in Teamfresh's Series D investment round, which has strong operational capabilities on the ground. This collaboration led to the creation of Lolab. Within two years, Lolab managed to generate sales of approximately 170 billion won, and although it recorded operational losses of around 10 billion won last year, it was expected to turn profitable next year. KT successfully grew the organization rapidly and completed a comprehensive study on the logistics business. Now, KT has shown its determination to focus on its core logistics data and solutions business. Meanwhile, Teamfresh has strengths in cold chain logistics and dawn delivery commerce, but it's true that their capabilities in general middle-mile logistics are still developing. Especially recently, as Teamfresh is expanding its business into various sectors including distribution, acquiring Lolab was seen as a way to strengthen their capabilities in general freight transportation. As a result, KT exchanged its Lolab shares for new shares issued by Teamfresh in a paid-in capital increase, thereby strengthening the governance structure over Teamfresh while allowing them to focus on the logistics solutions business they wanted to pursue. For Teamfresh, acquiring Lolab allowed them to absorb Lolab’s operational capabilities and network," explained Lee Seong-il, CEO of Teamfresh.
As CEO Lee Seong-il mentioned, Lolab's financial status, as disclosed, is not bad—in fact, it looks quite good if only accounting data is considered. Lolab's revenue for 2023 was 1,725 billion won, which is more than a 2.3-fold increase from 742 billion won in 2022. Although the operational loss for 2023 increased by 40.2% to 115 billion won from 82 billion won the previous year, this level of loss is reasonable considering the revenue growth.
For context, Teamfresh recorded 3,884 billion won in revenue last year. According to their disclosure, the structure of Teamfresh's earnings is interesting as product sales (2,452 billion won) drove more revenue than transportation sales (1,332 billion won). Nonetheless, with the addition of Lolab, it appears evident that a mid-sized logistics company with annual revenues exceeding 5,000 billion won will soon emerge.
CHAPTER 5
The Ongoing Competition in Freight Transportation
After hearing opinions from various stakeholders in the freight transportation industry regarding KT's decision to sell Lolab, it's clear that this market still needs time to develop. Despite the massive capital inflows from the three major telecommunications companies based on advanced technology, the market's perceived changes remain slow. Furthermore, continuous investment is required to secure a sufficient network of suppliers and consumers on these platforms. Alongside the newly started Lolab as a subsidiary of Teamfresh, T map Mobility's T map Cargo, LG Uplus's Freight Connect, CJ Logistics's The Carrier, and Kakao Mobility's Kakao T Trucker will continue their competition. The issues surrounding KT Lolab are likely not unique and are possibly shared by other corporate-run freight transportation platforms. Industry rumors suggest that KT has effectively abandoned the logistics business with the sale of Lolab, and the level of investment in freight transportation platforms by other telecommunications companies has reportedly waned.
A representative from a freight transportation brokerage firm shared the following thoughts: If major corporations continue to pursue a uniform strategy focused solely on directly connecting shippers and truck owners through a single platform in the middle-mile market, they will inevitably keep facing failures and retries. He expressed a hope that the platforms would not solely focus on advanced technology but would recognize and support the roles of transportation companies, brokers, and the existing market stakeholders to create a cooperative structure. What are your thoughts on this?
"What do the freight transportation platforms run by various corporations commonly emphasize? It's the IT-based platforms that are fast and easy to use, and the AI-based platforms aimed at efficiency and optimization. Yet, many shippers and truck owners still pay monthly fees to use old-fashioned network services. Does this imply that the freight transportation market doesn't really need cutting-edge platforms? When representatives from transportation companies, brokerage firms, and information network services gather, they unanimously agree on what technology this market really needs: efficient brokerage and clean settlement. They argue that old programs are sufficient for these needs and that there's no need to emphasize special technological capabilities. Whether it's telecommunications companies or big tech firms, just because a freight transportation platform has all the features doesn't mean existing market stakeholders will willingly share their turf. For a new platform to succeed in this market, it either needs to offer an overwhelmingly superior service that completely disrupts the existing market structure, or it needs to find a specific niche to focus on sharply, even if it's relatively small. I hope that the large corporate platforms will focus on the latter role within this complex market structure. By starting with small segments, increasing user base, enhancing understanding of the entire market, and beginning to gain industry trust, they might naturally grow into their role as platforms. From this perspective, Teamfresh might quickly find the right answers." - Mr. D, a representative from a freight transportation brokerage firm.
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