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KT Quarter Profit Drops, Competition to Intensify

KT Corp, South Korea's top fixed-line and broadband operator, reported on Friday a 65 percent drop in quarterly profit due to higher marketing costs and one-off gains a year earlier.

KT, which has 91 percent of South Korea's landline market and 44.5 percent of broadband customers, hopes to see a boost from new services such as high-speed mobile Internet Wibro and Internet Protocol TV (IPTV), which offers real-time TV programs and interactive services such as e-commerce via broadband.

However, it faces a growing competition as SK Telecom, South Korea's top mobile operator, is set to take the control in KT's landline and broadband rival hanarotelecom.

The combination will enable SK Telecom to offer packaged services ranging from telephone, mobile, broadband and IPTV at lower costs.

KT earned 57.4 billion won ($60.7 million) in the fourth quarter to Dec. 31, down from a 164 billion won net profit a year earlier, according to Reuters calculation based on the company's annual results.

The quarterly net profit missed a 73 billion won forecast by Reuters Estimates. The result suffers from a comparison with the fourth quarter of 2006, when KT booked one-off gains from asset sales and lower interest costs.

KT said in a filing with the Korea Exchange it posted 967.5 billion won in net profit in 2007, down 22 percent from 2006. Sales grew 0.7 percent to 11.94 trillion won.

"The company has earlier said 2007 will be a year of preparing for future growth. What matters is how it deals with the new environment this year, such as IPTV," said Kim Kyung-mo, an analyst at Mirae Asset Securities.

South Korea's parliament passed a law in December allowing IPTV, clearing a major hurdle for the new service.

Analysts polled by Reuters Estimates forecast KT to earn 1.03 trillion won in net profit in 2008.

KT said on Wednesday it was targeting more than 12 trillion won in 2008 revenue and set this year's operating profit target at 1.5 trillion won.