South Korea's KTF Second Quarter Profit Drops on Marketing Costs

KTF, South Korea's No. 2 mobile operator, reported a 37% drop in quarterly profit on Wednesday due to higher marketing costs to attract subscribers for its high-speed mobile
service.

KTF is aggressively marketing its high speed downlink packet access (HSDPA) service, launched nationwide in March, hoping video calls and other "third-generation" mobile services on the faster network will help it eventually take on leader SK Telecom.

Analysts expect earnings to improve in the second half as operators are likely to rein in marketing costs, but most remain cautious about the short-term impact on sales from 3G services.

KTF, which has 32% of South Korea's mobile market, posted a 51.1 billion won (US$55.9 million) net profit in the quarter to June, slightly below a forecast for a 58.6 billion won profit from Reuters Estimates.

The result compares with an 80.6 billion won profit a year earlier and 77.1 billion won earned in the previous quarter. Revenue rose 10% to 1.8 trillion won, in line with a 1.81 trillion won consensus forecast.

Mostly due to spending linked to 3G services, KTF saw marketing costs rising 35% from a year ago to 412 billion won. The company's subscriber base was 13.5 million at the end of June, 7 percent higher than a year earlier.

The unit of the country's top fixed-line company KT Corp. is forecast to earn 344 billion won in 2007, down from 412 billion won last year, according to Reuters Estimates.

Shares in KTF, in which Japan's NTT DoCoMo has a 10% stake, rose 8.2% in the second quarter, lagging the KOSPI's 20% gain.