SK Telecom Profit Plummets on Marketing Costs
SK Telecom, South Korea's top mobile carrier, reported a sharper-than-expected 76 percent fall in quarterly net profit on Thursday as marketing costs to attract users for new services wiped out revenue growth.
Losses at its affiliates such as U.S. wireless joint venture Helio and mobile TV company TU Media also hit its results.
SK is battling with No. 2 operator KTF Co over more profitable third-generation mobile services, such as video calls and wireless Internet.
3G-linked investment and marketing costs may fall in the coming quarters, while SK could benefit from a broader range of services once it finalizes a deal to take control of hanarotelecom, the country's No. 2 broadband company, analysts said.
SK, which controls 50.5 percent of the country's mobile market, posted 66.05 billion won ($70 million) in net profit in the quarter to Dec. 31, well below an average forecast of a 259.6 billion won profit from Reuters Estimates.
The earnings shrank from a 279.3 billion won profit a year earlier and 776.8 billion won earned in July-September, when the company booked a one-off gain related to its acquisition of a stake in China Unicom.
Revenue reached 2.92 trillion won, up 6 percent from a year earlier and above a consensus forecast of 2.89 trillion won.
SK had 21.97 million subscribers at the end of December, up 8.4 percent from a year earlier -- a strong increase in a country where almost 90 percent of population has a mobile phone.
But the growth was weighed down by a 34 percent jump in marketing costs, which totaled 854 billion won in the fourth quarter. For all of 2007, marketing costs were equal to 25.3 percent of the company's revenue.
Last week, rival KTF saw its fourth-quarter net profit halved to 53.05 billion won, hit by higher marketing costs.
Seeking to broaden the range of products it sells, SK is set to buy a controlling stake in hanarotelecom, a fast-growing broadband provider, for $1.2 billion.
The combination will enable the leading mobile operator to offer packaged services ranging from telephone, mobile, broadband to Internet Protocol TV (IPTV) at lower costs.
Shares in SK Telecom , which has a market value of $18.6 billion, rose 18.6 percent in the fourth quarter, bucking a 2.5 percent fall in the wider market, boosted by the hanarotelecom stake deal.