KT Climbs Most in 8 Months as Net Income Beats Estimates

KT Corp., South Korea’s largest phone and Internet company, climbed the most in eight months in Seoul trading after reporting first-quarter profit that exceeded analyst estimates, helped by demand for data use on smartphones.

KT rose 5.9 percent to 30,500 won at the close in Seoul, the most since Aug. 18. Net income fell to 407.6 billion won ($358 million) from 555.2 billion won a year earlier, Seongnam, South Korea-based KT said today. Profit beat the 311 billion-won average of 13 analysts’ estimates compiled by Bloomberg.

The company earned more revenue from the wireless business than expected as it boosted the number of subscribers to costlier mobile-phone plans covering more data, Kim Yoon Jeong, a Seoul-based spokeswoman for KT, (030200) said by telephone. KT is counting on fourth-generation network services using the so- called long-term evolution, or LTE, technology to lure subscribers to more profitable data plans.

“As premium phones become more popular, the subsidy per user is declining,” Ahn Jae Min, a Seoul-based analyst at Kiwoom Securities Co., said by phone. “As LTE subscribers increase, the average revenue per user will likely rise as well.”

KT’s rival SK Telecom Co. (017670) also advanced in Seoul trading, adding 3.4 percent, while South Korea’s benchmark Kospi index declined 1.6 percent.

KT’s operating profit, or sales minus the cost of goods sold and administrative expenses, fell 20 percent to 574.7 billion won. Sales gained 9 percent to 5.76 trillion won.

Wireless Sales

Revenue from the mobile business dropped 1.4 percent to 1.7 trillion won, KT said in a statement. The company had 8.54 million smartphone users at the end of the first quarter, accounting for 51 percent of its overall customers, according to the statement.

Increasing smartphone users helped KT cushion the impact of a government-led phone rate cut.

KT began in October to reduce monthly basic fees for its mobile-phone subscribers by 1,000 won and offer 50 free text messages, a month after SK Telecom started offering similar discounts under an agreement with the government.

SK Telecom reported a 40 percent drop in first-quarter profit this month.

KT spent 30.3 percent more than a year earlier in capital expenditure on a parent basis to upgrade networks and accommodate surging data traffic.

KT began the LTE service in January, six months behind SK Telecom and LG Uplus Corp. (032640), after a court blocked its plan to use 2G networks for the next-generation service.

SK Telecom had signed up 2.4 million LTE users as of the end of April, the company said May 2. KT aims to have 4 million LTE subscribers by the end of the year, the carrier said today.

The inclusion of BC Card Co., a credit-card issuer acquired last year, also contributed to the gain in sales, helping KT diversify away from the telecommunication business, the phone operator said.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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