KT Reaps Mobile Bonus

KT Corp. reported a massive hike in first-quarter profits today, following the reintegration of its mobile wing, KT Freetel Co. , in June. Also, the operator's CFO says he expects lots more mobile data use, following a wider smartphone rollout.

Yeon-Hak Kim, CFO, says KT has high expectations for wireline and wireless data and IP-based services, and he expects continued cost cutting, as he explained that KT remained on track to deliver its revenue and EBITDA targets for the year. He pointed to 22.7 percent growth in second-quarter VoIP revenues to 50.9 billion Korean won (US$41 million) as a trend that would continue to offset falling fixed telephony revenues. He says that KT will use VoIP to defend its telephony position and maintain its 20 million-strong subscriber base, or as close to it as possible.

The iPhone at KT?
In the wireless arena, Kim highlights a raft of new smartphones due to be introduced in the second half of the year to stimulate data usage. He would not reveal the specifics of these but says the iPhone could be amongst them. However, Kim added that should KTF introduce the iPhone, it would simply be one of a product range.

And now, the numbers...
For the quarter ended June 30, KT recorded operating revenues of KRW3.56 trillion ($2.8 billion) and net profits of KRW456.1 billion ($371 million) up 184.1 percent year on year, according to its guidance figures.

These results are not quite what they seem though, as the quarter includes wireless revenue from the former KTF for June although not for April and May. As the previous quarterly and yearly figures do not include KTF's wireless revenues, comparisons are difficult; but if second-quarter wireless revenues had remained constant with those of the first quarter, total revenues would have fallen just slightly from KRW2.773 trillion ($225.8 million) to KRW2.768 trillion ($225.3 million).

For the second quarter 2009, KT's wireless revenues reached KRW1.13 trillion ($920 million), accounting for 32 percent of the company's total revenue for the period, and up KRW796.2 billion ($648 million) from the first quarter. This compares with mobile competitor, SK Telecom (Nasdaq: SKM), which registered revenues of KRW3.068 trillion ($2.5 billion), providing a net income of KRW311.6 billion ($254 million).

At the end of the second quarter, SKT had 23.83 million subscribers and KTF 14.71 million, with a third operator, LG Telecom , accounting for another 8.53 million, according to Wireless Intelligence . Together they deliver market penetration of 97.6 percent, and it is this high penetration level that has heightened competition and focused attention on data revenues.

KT's mobile data revenues rose 8.6 percent year-on-year to KRW288 billion ($234 million), according to the company's figures, while SKT also saw its data revenues rise. Its wireless Internet revenue reached KRW671.2 billion ($546 million) at the end of the second quarter, up 11.8 percent year-on-year and 7.4 percent quarter-on-quarter.

SKT says that the growth was prompted by a rise in the number of flat-rate data plan subscribers, while KT put its increases down to increases in messaging services as well as flat-rate plan takeup. In total, SKT took 58 percent of the net additions in the second quarter, with KT ranking only third with 19 percent behind LG Telecom's 22 percent, according to Wireless Intelligence figures. This is a significant drop from KTF's 29 percent share of net additions in the first quarter. It is also the first time since the fourth quarter of 2007 that LG Telecom has picked up a bigger share of the month's additions than KTF/KT.

In its bid for market share, SKT raised its marketing expenditure 43.6 percent quarter-on-quarter to KRW948.6 billion ($772 million), as the market overheated. KT meanwhile highlights a drop in marketing spend of 19.5 percent year-on-year to KRW705.6 billion ($574 million), although this has risen 24.8 percent quarter-on-quarter. — Catherine Haslam, Asia Editor, Light Reading

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