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SK Telecom stock plunges on profit
By Alex Frew McMillan
SEOUL, South Korea (CNN) -- Shares in SK Telecom, South Korea's second-largest company by market capitalization, plunged the daily 15 percent limit on Thursday after the company reported a shock drop in profit. SK Telecom said Wednesday it made a net profit of 164 billion won ($140 million) in the fourth quarter. That was down 25 percent over the same time last year and well below forecasts. The sharp decline prompted a series of brokerage downgrades on Thursday, with Samsung Securities declaring the company a "sell" and Salomon Smith Barney trimming it to an "underperform." Sales actually increased for the quarter, up 38 percent to 2.4 trillion won ($2.01 billion). Marketing costs hit profitBut company said its bottom line was hit by hefty marketing costs, up 65.7 percent from the same time a year ago, to 533.5 billion won. "This was due to our aggressive marketing activities to lock-in our existing customers during the business suspension period and maintain our market leadership in second and 2.5 generation service, as well as in the third generation service [called] June," the company said in a statement. SK Telecom shares plunged the daily limit in Seoul, to 185,500 won, their lowest level in a year and a half. That was despite a 0.4 percent rise in the benchmark Kospi. SK Telecom controls 53 percent of the mobile-phone market in South Korea, the third-biggest in Asia and one of the most advanced. Regulatory hurdlesSeveral regulatory developments are raising doubts in investors' minds, though. Late last year, the government ordered it to cut rates by 7.3 percent as of this month. (Full story) In October, the government barred SK Telecom from recruiting new customers for 30 days, a penalty incurred because it was offering illegal handset subsidies. Seoul has banned most phone subsidies because it felt mobile-crazy Koreans were changing their phones too often, hampering the country's productivity. Most recently, Korea's Ministry of Information and Communication said last week it would introduce number portability as of January 2004, to aid smaller cell-phone players looking to boost market share.
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