Data revenue compensates declining voice business
By Kim Yoo-chul
Staff reporter
Korean telecommunications giant KT appears to be on the right track in its efforts to rebuild, as the increase in data usage of its customers begins to make up for its declining business model in voice.
KT, which is the country's largest telephone and broadband Internet company and the second-largest wireless carrier behind SK Telecom, has the Apple iPhone to thank for easing the transition in revenue sources.
The iPhone-initiated smartphone boom, further spurred by the new handsets of Samsung Electronics and LG Electronics, has ignited a wireless Internet explosion. And KT, the sole local provider of the iPhone, seems to be benefiting most.
KT is positive about the overall outlook for the remainder of this year as it is fully ready to respond to rising calls from consumers by releasing a series of wireless-focused gadgets.
"KT is seeking for a bigger share of South Korea’s wireless data market by introducing the iPhone 4 and various tablet-style PC models," said the company's chief financial officer (CFO) Kim Yeon-hak, Friday.
"We will expand Wi-Fi coverage across the country based on KT's strengths in fixed-line networks. Expanding of 3G networks and the build-up of long-term evolution (LTE) will follow according to our policy consistencies towards wireless operations," added the executive.
To batter handle the rising data demand, KT will expand the number of its Wi-Fi zones to 100,000 by the end of 2011 from 40,000 this year. As of the end of the first half of the year, its Wi-Fi zones numbered 30,000.
KT is aiming to reap 1.1 trillion won or $928 million in sales from smartphones and tablet PC services in 2011. It plans to more than double its smartphone subscribers to 6 million and raise tablet PC users to 1 million.
In the second quarter, operating profit during April-June period increased by 24.4 percent to 601.4 billion won year-on-year, while the quarterly sales inched up 2.3 percent to 4.99 trillion won during the same period, KT said in a regulatory filing to the Korea Exchange.
The operating profit was higher than that of its biggest local rival SK Telecom. SK reported 582 billion won as its second quarter profit.
Net profit for the latest quarter was down 31.8 percent at 348 billion won hit by foreign exchange losses.
As of the end of June, the number of KT’s smartphone customers was 1.2 million. iPhone users accounted for 840,000, according to KT.
The official introduction of the latest iPhone at the end of July has been delayed for as long as two months. Analysts say the delay won’t negatively affect KT’s earnings in the latter half.
"Sales in wireless data sales for the quarter rose 23.7 percent year-on-year as we've seen an increase of smartphone users," said a KT spokeswoman Kim Yoon-jeong, adding savings in payment marketing had backed up.
Sales of Internet TVs during the quarter spiked by 80.3 percent as the fixed-liner added 250,000 more Internet television users, KT said in the filing.
Analysts say KT's abundance in fixed-line networks will fuel the momentum further in the local wireless data sector by leading SK Telecom.
Dilemma in broadband business
KT, which controls 90 percent of the country's fixed-line telephony market and 42.5 percent of its broadband customers, is facing a dilemma over the free fall of its broadband unit.
KT has been struggling to secure its bottom line in the broadband business amid the blurring lines between broadband and wireless devices mostly due to the explosive growth in smartphones.
The outlook is still murky in KT’s broadband business as finding customized strategies is not proving easy, according to market analysts.
KT said the quarterly sales of its telephony unit totaled 1.13 trillion won, a decrease by 8.5 percent year-on-year. Sales of local calls were down by 20 percent, while those of long-distance calls posted some 20 percent in losses.
"We are driving up to provide more bundled packages capitalizing on Internet TVs. But it is quite inevitable sales of the telephony unit will continue the staggering moves," said Kim of KT.
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