KT Profit Falls on Higher 4G Network, Marketing Spending

KT Corp. (030200), South Korea’s second- largest mobile-phone carrier, reported a 55 percent drop in fourth-quarter profit amid increased spending on fourth- generation network technology and marketing.

Net income fell to 93.6 billion won ($86 million) from 207.1 billion won a year earlier, the Seongnam, South Korea- based company said in a regulatory filing today. That missed the 219.6 billion-won average of 14 analyst estimates compiled by Bloomberg.

KT lagged behind rivals including bigger competitor SK Telecom Co. (017670) with its deployment last year of 4G services based on so-called Long Term Evolution technology, which allows faster downloads and Web browsing. KT has been increasing spending to lure more users to the services that generate higher profit margins as companies including Samsung Electronics Co. (005930) and Apple Inc. (AAPL) ramp up sales of LTE-enabled devices.

“Telecom operators are likely to continue to pursue aggressive marketing policies to expand their long term evolution subscriber base,” Fitch Ratings analyst Alvin Lim said in a Jan. 23 report. Regulatory curbs on excessive competition may limit marketing efforts this year, he said.

KT shares fell 1.4 percent to close at 36,600 won Thursday in Seoul while the benchmark Kospi index declined 0.1 percent.

Operating profit, or sales excluding the cost of goods sold and administrative expenses, fell 77 percent to 51 billion won, KT said. Sales increased 3.6 percent to 6.2 trillion won.

Regulatory Fine

The Korea Communications Commission on Dec 24. imposed a combined 11.9 billion won fine on SK Telecom, KT and LG Uplus Corp. (032640) and ordered them to temporarily stop enrolling new subscribers, for offering excessive subsidies to their smartphone users.

KT’s subscriber acquisition will be temporarily stopped for 20 days from Feb. 22 while it was fined 2.85 billion won.

Marketing costs increased 18 percent in the fourth quarter to 635 billion won from a year earlier, the company said today.

KT is targeting 2013 sales of 25 trillion won, compared with 23.8 trillion won last year, it said. It also set a capital outlay target of 3.5 trillion won for this year, from 3.7 trillion won spent in 2012.

KT introduced Apple’s iPhone in South Korea in November 2009. It has been selling the latest iPhone 5 device running on the 4G network technology since December in the Korean market.

Samsung’s Galaxy S III, introduced in May, and its Galaxy Note II phone-tablet device, introduced September, also support the 4G technology.

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

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

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