More marketing costs may crimp profit at KT

KT Corp., Korea’s largest telephone and Internet company, forecast its lowest annual operating profit in four years because of increased marketing costs to prevent customers from defecting to rivals.
Operating profit, or sales minus the cost of goods sold and administrative expenses, will probably fall to 1.4 trillion won ($1.5 billion) this year from 1.8 trillion won in 2006, the Seongnam-based company said in a regulatory filing yesterday. The forecast missed a 1.7 trillion won average estimate of 26 analysts surveyed by Thomson Financial.
Chief Executive Officer Nam Joong-soo, 51, is increasing spending after losing customers to smaller rivals in a market where six out of seven homes already have high-speed Internet access. KT is counting on services such as wireless broadband and online television services to revive growth as revenue from traditional phone calls and broadband access shrink.
“To lure new users, we expect expenses to rise this year,” Chief Financial Officer Kwon Haing-min said.
Fourth-quarter marketing expenses rose 50 percent to 273.3 billion won, the highest in at least two years, the company said.
KT’s share of Korea’s broadband market shrank to 45.2 percent at the end of December, from 51.2 percent a year earlier. Hanarotelecom Inc., Korea’s second-largest high-speed Internet provider, increased its share to 25.7 percent, while Seoul-based Powercomm Corp. had 8.6 percent of the market.