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KT profit dips as more go mobile
SEOUL, South Korea -- South Korea's biggest fixed-line and Internet broadband operator, KT Corp, says quarterly profits fell 33 percent as more users switch to mobile. As well, growth in Korea's telecoms sector is beginning to slow. KT's net profit was 325.5 billion won ($275.9 million) for the three months ended June 30, the company said Friday, well short of the market consensus of 358.2 billion won. The result compares with a revised profit of 488.5 billion won a year ago and 960.6 billion won in the first quarter. It also stands in contrast to the earnings of South Korea's biggest mobile operator, SK Telecom, which posted record second-quarter net profit of 548 billion won ($465 million) on Thursday. (Full story) Subscriber growth and heavy use of mobile Internet and text messaging lifted SK Telecom's result above market expectations. Shares in KT, the country's fifth-biggest stock with a market value of $11 billion, finished down 1.24 percent to 43,750 won. The broader Kospi index was up almost 2 percent. SK Telecom, which ranks second to Samsung Electronics in market capitalization, was up 3 percent to 211,000 won. KT's core earnings have come under pressure as customers migrate to mobile phones from fixed lines. As well, growth in South Korea's broadband Internet market is slowing. The country has the world's highest penetration of broadband connections with about 65 percent of 16 million households having broadband. KT serves about half of those subscribers. KT competes with Hanaro Telecom and Korea Thrunet in the broadband market and with Dacom Corp in the fixed-line telephone market. KT's mobile unit, KTF, competes with SK Telecom and third-ranked LG Telecom in the mobile market. KTF and LG said on Wednesday their second-quarter earnings fell because of higher costs. In a country of 48 million people, SK has 17.86 million subscribers, KTF has 10.49 million and LG has 4.8 million. All three are looking to generate more sales from wireless data services and games. Analysts say KT, which holds about 45 percent of KTF, may decide to merge with its mobile unit so it can bundle wireless and fixed-line services and avoid investment duplication. One potential threat to KT is LG Group's ambition to build a third big telecoms player through control of the second-biggest broadband operator Hanaro, analysts said. "KT has become a dull utility stock," Kim Hwang-lae, a fund manager at Woori Investment Trust Management Co, told Reuters news agency. "The company has no sparking business model and risks of strengthening government regulation are always set to pose a threat." KT said second-quarter profit would have increased, if it excluded one-time stock transaction gains of 246 billion won in the second quarter of last year. Sales rose slightly to 2.95 trillion won in the April-June period, versus 2.86 trillion won a year ago. KT's operating profit was helped by cost cutting as well as reduced depreciation and less capital expenditure. Operating profit rose to 643.2 billion won from 451.2 billion won a year ago, the company said.
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