SKT set to repeat worse-than-expected Q1 profit

SK Telecom, the nation’s largest mobile phone operator, reported first-quarter profit that missed analysts’ estimates amid rising costs and a cut in call prices that crimped revenue.

Net income fell 40 percent to 323.3 billion won ($287 million) from 537 billion won a year earlier, the company said in a statement yesterday. That falls just short of the 358.4 billion won average predicted by 13 analysts, as compiled by Bloomberg.

SK Telecom’s mobile call revenue fell 2 percent as it cut phone rates amid a government initiative to control inflation. Operational spending rose 7 percent as the company upgraded networks to accommodate surging data traffic and revive earnings with faster fourth-generation services that use long-term evolution (LTE) technology.

“The numbers are a bit short of expectations,” said Yang Jong-in, an analyst at Korea Investment & Securities. “The same trend will likely continue in the second quarter, with both marketing costs and competition increasing.”

Operating profit fell 26 percent to 452 billion won on sales of 3.99 trillion won.

SK Telecom lowered monthly basic rates for its cell phone subscribers by 1,000 won from September and started offering 50 free text messages each month. The carrier was the first to agree with the government to lower phone bills as the country tries to curb inflation.

The company’s parent-based average revenue per user fell 3 percent in the first quarter, while the number of subscribers increased by 2 percent, it said.

Its consolidated operational spending increased 7 percent from a year earlier, with depreciation costs rising 2.6 percent on capital expenditure to expand LTE coverage, the company said. Spending on promotions and advertisements rose 27 percent.

SK Telecom began its commercial LTE service in July, starting in Seoul. The company signed up 2.4 million LTE users as of end of April, it said. The company expects the number to exceed its target of six million by the end of this year.

“SK Telecom expects its LTE market leadership and robust subscriber growth to result in improved earnings in the mid- to long-term,” the carrier said.

Competition among local carriers is set to intensify from the second quarter as they promote their LTE services, Kim Jang-won, an analyst at IBK Securities, said earlier this month.

SK Telecom’s shares fell 0.74 percent to 134,000 won yesterday.

Bloomberg