KT profit falls on iPhone expenses

By Kim Yoo-chul

Staff Reporter

KT, the nation's top fixed-line operator and the second-biggest mobile carrier, said Friday that its first quarter operating profit fell 7.6 percent to 552.7 billion won from 598.2 billion won mainly due to higher marketing expenses for iPhones.

But the good news is that it beat its archrival SK Telecom in terms of operating profits for the first time in 23 months.

KT has been selling Apple's 3G iPhones. So far, over 550,000 have been sold.

KT said its quarterly revenue increased 6.8 percent to 4.82 trillion won from 4.51 trillion won year-on-year, while its net profit was 372.5 billion won for the three months ending March 31, compared with 197.7 billion a year earlier.

KT recalculated all of the year-earlier figures on a merged basis to provide year-on-year comparisons.

KT officials say it has beaten its biggest domestic rival SK Telecom in terms of quarterly operating profit for the first time in 23 quarters.

The operating profit by SK Telecom was 480.5 billion won. KT's spokesman said its "selective approach" towards smartphones paid off.

But concerns are running high over the deteriorating cash balance sheets of KT and SK Telecom as the two biggest carriers are set to introduce more of their smartphone models in the second quarter.

KT's market expenses rose 26 percent to 714.1 billion won in the first quarter from a year earlier as the company offered more subsidies to smartphone users. SK Telecom increased its spending on marketing by 28 percent to 846 billion won during the period.

In a conference call to analysts, KT's chief financial officer (CFO) Kim Yeon-hak said the smartphone portion will equip at least over 20 percent out of the total by the end of this year and added KT was betting on the firing demand for wireless data.

"We will expand our WiBro coverage across the nation and strengthen the position as the leader in the local wireless data market," Kim said.

Amid tougher competition in Korea's telecom market, where nearly everyone holds at least one mobile phone, KT has been aggressively seeking new business opportunities. Officials say the wireless data market is the key one to back up such moves.

Analysts expect KT to post solid earnings going forward with the rise in sales of wireless data services, driven by strong interest for smartphones, amid government moves to tighten regulations to limit marketing rivalry.