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Profits dip at KTF, LG Telecom

KTF competes with SK and LG in the Korean mobile market.
KTF competes with SK and LG in the Korean mobile market.

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SEOUL, South Korea -- Profits at South Korea's second and third-largest mobile phone carriers fell in the June quarter, the companies said Wednesday.

KTF Co, the No.2 mobile operator, said earnings fell about 4.5 percent in the second quarter of 2003 because of higher interest payments and one-off charges.

Smaller rival LG Telecom saw its net profit plunge 57 percent because of higher operating costs.

The companies compete in a crowded market with SK Telecom, which has 17.86 million subscribers, compared to 10.5 million for KTF and 4.8 million for LG Telecom. All three are looking to generate more sales from wireless data services and games.

KTF, which is controlled by telco giant KT Corp, posted a net profit of 132.9 billion won ($112.8 million) in the three months to June 30. That compares with a 138 billion won profit a year earlier and 92.2 billion won in the March 2003 quarter.

Third-ranked LG Telecom said Wednesday its second-quarter net profit was 24.4 billion won ($20.6 million), compared with 57.4 billion won for the same period of 2002.

It said the 57 percent decline was due to higher operating costs, mainly depreciation expenses.

Market leader SK Telecom is expected to post a slight rise in second quarter profit to about 480 billion won ($406 million) when it reports on Thursday.

South Korea is Asia's third-largest mobile phone market behind China and Japan. Three-quarters of the country's 48 million people already carry at least one mobile phone.

KTF said Wednesday its operating profit rose 14 percent from a year ago as it signed up new subscribers and customers spent more on average.

LG Telecom's sales were up 13 percent, but operating profit fell about 34 percent from a year ago.

"Operations have been on a recovery path since the fourth quarter last year, when we weeded out non-active and delinquent customers," KTF spokesman Lee Young-bae told Reuters news agency

KTF is a unit of KT Corp, which holds a 44.6 percent stake in it now and is moving to a 46.8 percent share before the end of the year.

"In general, (KTF's) second-quarter performance was OK but there is no special momentum to it," Yang Jong-in, an analyst at Dongyang Securities Co, told Reuters.

KTF's profits were hurt by higher interest payments and a one-time charge of 22.5 billion won related to technical adjustments to its network.

KTF is looking to generate more revenue from wireless data services such as online games and mobile phone karaoke.

Average revenue per user rose to 39,099 won in the second quarter from 38,771 won in the same period last year and 37,862 won in the first quarter. That was despite a government-ordered cut in voice tariffs in January.

The company said second-quarter sales edged up to 1.28 trillion won from 1.25 trillion a year ago. Operating profit rose to 226.9 billion won from 198.4 billion.

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