Reduced profit hurts SK Telecom

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Reduced profit hurts SK Telecom

SK Telecom Co., the nation's largest mobile communications carrier, took the unusual step of reporting at 1 a.m. yesterday, that it was repurchasing 500 billion won ($427 million), or 3 percent, of its 85 million listed shares. In addition to the disclosure, the company announced it would review its investment plans for 2003. "It was unusually early to make the disclosure at 1 a.m when most investors were asleep. However, the company thought the disclosure system was operating 24 hours a day, and overseas markets were also open at that time," an SK Telecom official explained. SK Telecom shares on the Korea Composite Stock Price Index (Kospi) plunged by the daily limit of 15 percent on Thursday, following a 3.5 percent slide the day before. Yesterday, the stock fell another 4 percent to end the day at 178,000 won -- a 21-percent loss over the past three trading days that saw US$3.5 billion wiped off its market value. Before Thursday, the blue-chip stock had not fallen by the daily limit for 33 consecutive months. Analysts attributed the plummet to the company's fourth-quarter net profit of 164 billion won last year -- down 63 percent from 444 billion won in the previous quarter -- which disappointed foreign investors. Marketing costs, meanwhile, ballooned 37 percent to 533 billion won from the third quarter. In addition, investors said, SK Telecom's capital expenditure for this year was expected to reached 2.5 trillion won, compared with initial market expectations of 1.5 trillion won. The company said it needed the extra money to launch its new international roaming service, which would allow subscribers to use their mobile phones in more than 60 countries starting from the second half of this year. Industry sources, however, said SK Telecom had increased its projected investment rather than focusing on more profits because the Korean government had been pushing it to lower charges and pay more taxes. The release of the company's 2003 expenditure plan gave the impression to shareholders it was wasting too much money on reinvestment without being sure of demand for new networks and systems, sources said. Furthermore, the Ministry of Information and Communication said earlier this month that the mobile service prefix for new subscribers would be unified into one "010" number by next year. An official at SK Telecom said the ministry's new plan would encourage the firm to spend more money on marketing as its "011" and "017" brand names disappeared from the market. "It is predictable investors would lose confidence in SK Telecom if the company kept changing its major business plans and blaming it on the government," a local analyst said. "SK Telecom should stop responding to every movement the government makes," said Yang Jong-in, an analyst at Dongwon Securities Co. "The company should be consistent in its management plans, not reversing its plan in a day." The company has yet to reveal details of its new investment plans for this year. by Kim Jong-yoon
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