KT shows biggest profit drop of top three carriers

KT, the nation’s second-largest mobile carrier, announced yesterday its operating profit plunged 58.6 percent in the first quarter from a year earlier and sales fell 4.2 percent, following dismal first quarter performance reports by SK Telecom and LG U+.

In the first quarter, the top three mobile carriers engaged in cutthroat competition to secure subscribers by spending on marketing promotions and giving huge subsidies, leading the government to hit the companies with 45-day staggered operating bans.

KT said Wednesday it posted 5.85 trillion won ($5.66 billion) in sales and 152 billion won in operating profit in the first three months.

The company saw the biggest year-on-year operating profit decline of the three top providers, with SK Telecom’s profit down 37.6 percent and LG U+ shrinking 8.1 percent.

KT said its profit decline was mostly due to a sharp increase in spending on marketing, which was up 11.1 percent from a year earlier to 775.2 billion won.

SK Telecom, the top mobile carrier, poured 1.1 trillion won into marketing, or 21.4 percent more than in the same quarter last year and the highest since the third quarter of 2012, when it spent 1.04 trillion won in an attempt to take the lead in the LTE market.

LG U+ spent 551.1 billion won on marketing in the first quarter, a 22.6 percent increase year-on-year.

KT’s sales were down from the first quarter of last year due to the government-enforced business suspension in March and April.

During the ban, KT and the other two carriers could not attract new subscribers.

But KT reported its number of subscribers increased and average revenue per user rose 1.5 percent to a total of 1.78 trillion won.

KT said it will further increase its average revenue per user by expanding the number of LTE subscribers and regaining its previous 30 percent shar of the wireless market.

In its fixed line business, KT’s sales fell 6.7 percent to 1.42 trillion won.

Thanks to an increase in the number of Internet TV subscribers, KT’s media and content sales went up 17.7 percent to 369.6 billion won.

KT is looking to offset the decline in sales of its fixed-line telephones in the second quarter with labor cost savings after it announced that it will lay-off 8,304 employees under a plan the company describes as early retirement.

“It is expected that we will be able to save 460 billion won in labor costs this year and 700 billion won next year,” said a spokesman for KT. “Also, we forecast a positive outlook for the second quarter, with the mobile communications market stabilizing and marketing costs declining.”

BY KIM JUNG-YOON [kjy@joongang.co.kr]