SKT operating profit falls

SK Telecom’s operating profit fell 10.1 percent last year from a year earlier, dragged down by the poor performance of its online shopping and retail subsidiaries.

The nation’s largest telecommunications company posted 1.54 trillion won in operating profit last year, according to a regulatory filing on Friday. Revenue inched down 0.3 percent to 17.09 trillion won ($1.34 billion), and net profit increased 9.5 percent from the previous year to 1.66 trillion won.

The lower operating margin can largely be attributed to massive spending last year by its subsidiary SK Planet, which operates the online shopping site 11ST. As Korea’s e-commerce market becomes ever competitive, SK Planet has aggressively invested in expanding and diversifying services on its 11ST platform.

Despite the effort, SK Planet’s sales fell 27.6 percent to 1.18 trillion won. Industry analysts estimate the company incurred a 300 billion won operating loss.

Sales declines in other subsidiaries including PS&Marketing, SK Telecom’s mobile device retailer, also contributed to lower than expected earnings, the company said.

Still, SK Telecom’s core telecommunications business managed steady growth, backed by an increase in its LTE service subscribers. The service offers high-speed wireless communication for mobile devices. The number of SK Telecom’s LTE subscribers jumped 11.1 percent to 21.08 million last year.

Operating profit from SK Telecom’s flagship telecommunications business increased 7.4 percent to 1.78 trillion won.

Still, the earnings report poses a threat to the company’s position as Korea’s No. 1 telecom service provider. Its two sole rivals have reported two-digit growth last year. KT’s operating profit went up 11.4 percent to 1.44 trillion won, and that of LG U+ expanded 18.1 percent to 746.5 billion won.

To solidify its place in the local market, SK Telecom said it would focus on new business areas including media content, Internet of Things and artificial intelligence platforms. Its sales target for the year is 17.8 trillion won, with plans to inject an additional 5 trillion won over three years in new ventures with subsidiaries SK Broadband and SK Planet.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]