SK Telecom sees net profit decline by 40%
By Kim Yoo-chul
SK Telecom said Wednesday that its first-quarter net profit fell by 39.8 percent to 323.3 billion won ($286.5 million) between January and March, hit by rising investment costs for advanced telecom networks and a cut in mobile charges.
Its operating profit during the first three months of the year declined by 26.4 percent from a year earlier Its sales edged up 2 percent year-on-year to 3.98 trillion won while operating profit dropped 26.4 percent to 452.3 billion won.
``A cut in mobile charges and investments for networks to respond to higher data traffic amid the explosive demand for data-intensive devices such as tablets and smartphones hurt us,’’ said an SK Telecom spokesman.
Under the government’s consistent pressure as part of Seoul’s efforts to tame inflation, SK Telecom began to cut its monthly basic rates for its customers by 1,000 won from September last year. It was the first local mobile carrier that was surrendered to the government’s demands to lower monthly mobile charges.
The company’s quarterly net profit was 323.2 billion won from 537 billion won a year ago. Operating profit during the first quarter was 452 billion won. Revenue for the quarter was 3.98 trillion won thanks to its massive promotional campaigns for faster fourth-generation mobile services using the long-term evolution (LTE).
It announced the quarterly results on a consolidated basis ― an international accounting measurement that includes all SK Telecom’s overseas performances.
Analysts are mixed about the business outlook for the firm as it is being pushed to spend more to strengthen its bottom line through LTE customers throughout this year.
LG Uplus, the smallest local carrier, is seeing more LTE customers and is involved in a neck-and-neck race with SK Telecom in the new area. Competition among local carriers is set to intensify from the second quarter as they promote their LTE services, another challenging factor for SK.
Also, SK hynix’s ambitious bid to buy Japan’s Elpida Memory is adding to uncertainties as at least three or four trillion won would be needed from SK Telecom to buy the bankrupt Japanese company, which is too big for it, analysts said.
``The recent corrections of SK Telecom shares are mostly due to SK hynix’s intent to buy Elpida. We doubt SK hynix will end up with the deal. The `Elpida risk’ is squeezing SK Telecom,’’ said Ahn Jae-min, an analyst at Kium Securities.
SK bought a 21 percent of SK hynix for 3.4 trillion won.
But SK Telecom insists that it will report better earnings in upcoming quarters, citing a growing number of its LTE users and healthy demand for chip-embedded digital devices such as smartphones and tablets, which is good for SK hynix.
``SK is still positive of having over 6 million LTE customers by the end of this year and that will help us see an increased average revenue per user (APRU) rate from customers,’’ said the SK Telecom official.
ARPU is the barometer to gauge the profitability of mobile carriers. ``SK Telecom is looking good, at least in its LTE business. Its ARPU will rise, while growing profits at SK hynix will also help SK Telecom report better earnings,’’ said Seong Joon-won, an analyst at Shinhan Financial and Investment.
In a separate statement, the company said it has collaborated with Nokia Siemens Networks to export SK’s patented ``Smart Push’’ technology,’’ that prevents bottlenecks in LTE and third-generation (3G) networks.
SK said the partnership is a part of its `` all-in LTE’’ strategy and stressed the collaboration will help it yield much revenue.