SKT posts big year-on-year Q1 gain

SK Telecom, the country’s top carrier, reported a 59.5 percent year-on-year surge in operating profit for the first quarter, backed by the strong performance of its subsidiaries, such as SK Planet.

The company reported 402.6 billion won ($372.8 million) in operating profit, with revenue edging up 0.9 percent to 4.24 trillion won.

The company’s gain is somewhat deceptive, however, as the company’s profits dropped substantially last year due to volatile market conditions.

In anticipation of the government’s restrictions on smartphone subsidies, SKT dramatically increased the amount it offered customers, taking a substantial hit to its profits as a result.

The company also lost money by compensating users who experienced technical glitches during the first quarter of 2014.

When compared to the previous quarter, operating income was down 17.8 percent and sales slumped 1.1 percent.

The decrease was due in part to an increase in marketing costs and the company’s move to eliminate membership fees.

SK Telecom spent 846 billion won on marketing in the first quarter, a 3.68 percent increase from the 816 billion won in the previous quarter.

Net income jumped 65.6 percent to 442.7 billion won, as SK Hynix and other affiliates posted strong numbers, the company said.

SK Hynix’s first quarter beat market expectations, boosted by healthy demand for memory chips from makers of moble devices.

Net income, however, fell 12 percent because of lower operating income.

The company said it will remain competitive by staying away from high-cost marketing to focus on delivering quality service.

“Based on our strong product and service offerings, SK Telecom will shift the competition paradigm to create a healthy business environment and improve our profitability,” said Lee Yong-hwan, chief financial officer of SK Telecom.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]