KT CEO
Nam Joong-soo |
By Kim Tong-hyung
Staff Reporter
KT is showing signs of a common illness befalling Korean telecom firms, being boxed in a saturated domestic market without finding new growth engines. Internet Protocol TV or IPTV, its hope for expansion, is now stuck in the doldrums due to government indecision.
Under the circumstances, Korea 's biggest fixed-line telephony and broadband Internet operator, Thursday announced that it has lowered its sales and profit projections for 2008 due to slumping fixed-line sales and an expected rise in marketing costs. It is the second consecutive quarterly disappointment for KT investors.
Topping it is a risk of losing more customers, as the government is set to allow number portability for voice over Internet protocol (VoIP) services or Internet phones.
The policy allows telephone users to switch to cheaper Internet-based phone services without changing their old numbers, an alarming development for KT which owns about 90 percent of the country's fixed-line market.
KT will also spend lavishly to secure an inroad in the emerging market of IPTV, pitted in an expensive marketing war with industry rivals Hanarotelecom and LG Dacom.
At the start of the year, KT forecasted sales of 12 trillion won (about $11.9 billion) and an operating profit of 1.5 trillion won for fiscal 2008. The company's revised forecast projects sales of 11.9 trillion won and an operating profit of 1.2 trillion won.
``It's regrettable that we are announcing disappointing results for consecutive quarters, although we will announce our second-quarter results two weeks from now," said Maeng Soo-ho, KT's chief financial officer, in a conference call Thursday.
With mobile-phone carriers lowering rates for calls made between their own subscribers, KT is seeing a significant decline in land-to-mobile calls, Maeng said.
And with industry rivals like SK Telecom, the No. 1 wireless carrier, Hanarotelecom and LG's telecommunications trio ― LG Telecom, LG Dacom and LG Powercomm ― planning to release new bundle products, or a combined package of mobile, fixed-line, broadband and Internet television, KT believes marketing costs could only rise.
The government clampdown on illegal telemarketing activities, with rival Internet operator Hanarotelecom hit with a 40-day suspension, has also led to an increase in marketing costs as KT chose to halt its telemarketing activities and recruit customers face-to-face instead, Maeng said.
Searching for Answers
KT claims that its slumping revenue from its traditional cash could be compensated by its next-generation services like WiBro, the Korean version of WiMax that provides wireless broadband connection, and IPTV.
However, its questionable how much hope the company could rest on the new sectors, neither of them expanded substantially, in its challenge to meet the revised earnings target.
Acquiring its mobile affiliate, KTF, which KT has been trying to do for some time, would make a quick difference in the top-line. However, industry watchers are wondering whether KT's lowered earnings projections indicate the company's judgment to delay its absorption of KTF to next year.
Retaining their fixed-line customer pool amid the emergence of VoIP is KT's biggest priority. The company has launched its own version of Internet phone services, dubbed as SoIP for service over Internet protocol, to stop their subscribers from migrating to other carriers.
KT has gathered just about 200,000 customers for its SoIP services now and would surely prefer the government to drag the number portability issue on as long as it could.
The company says its target is to retain 20 million customers in fixed-line and Internet-based telephony combined, and plans to release a SoIP phone that allows video calls during this month.
The prediction for IPTV, which could start commercial services in September, is murkier. KT is optimistic that the number of customers for its Mega TV services, which provides video-on-demand services but not real-time broadcasters, is quickly catching up to that of Hanarotelecom's Hana TV subscribers.
However, the success of IPTV is reliant on the provision of real-time content and securing programs from the country's three terrestrial broadcasters ― KBS, MBC and SBS ― could make all the difference. KT refused to comment on their budget for acquiring IPTV content, but said the costs were reflected in the revised projections.
thkim@koreatimes.co.kr
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yistory@koreatimes.co.kr
