KT Corp net falls as costs outweigh sales growthKT Corp net falls as costs outweigh sales growth
KT Corp reports drop in Q3 earnings after being hit by higher labor and content costs, but beats estimates and achieves AI, cloud, and DX growth.
November 7, 2023
KT Corp has reported a drop in third-quarter earnings after being hit by higher labor and content costs.
The Korean operator recorded a net profit of 288.3 billion Korean won (US$220 million) on 3.4% higher revenue of KRW6.70 trillion ($5.1 billion), it said in a regulatory filing Tuesday.
Operating profit was KRS321.9 billion ($250 million), 28.9% lower than last year, with 5.8% higher opex and an EBITDA margin of 18.8%, down 2.2 percentage points.
But net earnings were ahead of the average estimate of KRW271.1 billion ($210 million), according to an analysts' poll.
CFO Kim Young-jin told an earnings briefing the spike in cost was felt most strongly in its core telecom business, with labor costs up 18% and operating profit plummeting 40%.
He said last year the salary increase was introduced in the fourth quarter but it took place early this year, adding around KRW140 billion ($110 million) in costs, while the smoothing-out of content sourcing costs had added another KRW150 billion ($110 million).
Excluding these two factors, operating income in the third quarter would have increased by 19%, he said.
Cloud grows 35%
The company reported some promising growth in its B2B segments, grew 2.7%, to KRW982 billion won ($750 million), with some orders from last year starting to generate revenue. Demand was strong for digital transformation, which grew 16% and now accounts for more than a third of enterprise sales, while the cloud subsidiary grew 35%.
The company has emerged in relatively good health after a disorderly period earlier this year, going six months without a CEO earlier after investors rejected its internal candidates. It appointed Kim Young-Shub, previously the head of LG's IT services subsidiary, to the top post in August.
CFO Kim said the new CEO's key goals were to ensure the company's IT capabilities generate B2B growth, to make sustainable profits in B2C and to build AI capabilities that will trigger innovation and growth.
Like local rival SK Telecom, KT has rolled out a series of AI initiatives in the past two years.
Last week it unveiled a large language model called Mi:dm, targeted at verticals such as manufacturing, financial and education.
Kim said KT offered a full AI stack that included Korean language capability, cloud, network and data center.
"Customers can leverage these capabilities to develop customized services that will satisfy their exact needs."
KT added 309,000 5G customers in the quarter to take the total to 9.59 million, accounting for 38% of the customer base.
Mobile ARPU was KRW33,838, 2.8% higher than in the third quarter last year, but slightly below the second-quarter level of KRW33,948.
The company’s stock on the KRX dropped 2.39% in Tuesday trading.
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