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SK Telecom's Second Quarter Profit Rises on Higher Sales

SK Telecom, South Korea's top mobile carrier, reported a modest 8% rise in quarterly profit as solid subscriber growth and healthy mobile Internet service revenue outstripped higher marketing costs.

SK, which controls 50.5% of South Korea's mobile phone market, posted a 403.3 billion won (US$441.4 million) net profit in the second quarter to June, slightly below a 417.2 billion won forecast from eight analysts surveyed by Reuters Estimates. The result compares with a 373.3 billion won profit a year earlier and 396.3 billion won earned in the previous quarter.

SK is fighting an aggressive marketing campaign by the country's second-biggest carrier, KTF, over users for more profitable "third-generation" mobile services, such as video calls and wireless Internet.

Analysts expect earnings to improve in the second half as operators are likely to rein in marketing spending, but most remain cautious about the potential for short-term revenue growth from the advanced mobile services.

SK, which controls 50.5% of South Korea's mobile phone market, posted a 403.3 billion won (US$441.4 million) net profit in the second quarter to June, slightly below a 417.2 billion won forecast from eight analysts surveyed by Reuters Estimates.

The result compares with a 373.3 billion won profit a year earlier and 396.3 billion won earned in the previous quarter.

The announcement follows a local media report quoting SK's vice chairman as saying the company was considering a bid for No. 3 U.S. wireless firm Sprint Nextel . SK's chief financial officer Ha Sung-min told Reuters the report was "groundless."

Bankers and analysts had ruled out a full takeover by SK, whose $19 billion market value is less than a third of Sprint Nextel's, but said SK might be eyeing a small stake.

SK's revenue also rose 8% to 2.84 trillion won, matching a consensus forecast from the surveyed analysts.

SK had 21.36 million subscribers at the end of June, 7% higher from a year earlier, a strong performance in a country where 88% of population has a mobile phone. Average revenue per user in the second quarter grew 2% from a year ago.

SK and KTF launched nationwide HSDPA (high speed download packet access), an upgraded 3G service, in March. SK spent 703.1 billion won in marketing in the April-June quarter, up 17% from a year earlier, to defend its lead against KTF's push.

KTF on Wednesday reported a 37% drop in second-quarter net profit to 51.1 billion won, hit by heavy marketing costs to promote its 3G service.

SK Telecom , which has a market value of about $19 billion, rose 11.2% in the second quarter, lagging the KOSPI's 20% gain.

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