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SK Telecom Q4 profit disappoints as costs weigh

SK Telecom Q4 profit disappoints as costs weigh
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First Published: Tue, Jan 25 2011. 11 47 AM IST
Updated: Tue, Jan 25 2011. 11 47 AM IST
Seoul: South Korea’s top mobile carrier, SK Telecom, on Tuesday posted lower-than-expected profit for the quarter ending in December as higher costs tempered a healthy rise in the number of smartphone subscribers.
The major seller of Samsung Electronics’ Galaxy S smartphone should see earnings growing this year because of rising smartphone penetration, and as it plans to introduce a wide range of smartphones to take on second-ranked operator KT, which exclusively offers Apple’s iPhone.
But competition, tariff cuts and network costs could weigh on SK Telecom’s earnings, analysts say.
SK Telecom was hit by the launch of Apple’s iPhone by second-ranked operator KT in late 2009. KT has sold more than 2 million iPhones so far in South Korea.
In late June, SK Telecom launched the Galaxy S smarpthone to take on the iPhone, and it has sold more than 2 million units.
SK Telecom’s 2010 operating profit dropped 7% from 2009, while its total sales edged up 3%. Its wireless Internet sales climbed 13%, driven by smartphone subscriber growth.
SK Telecom shares rose only 2.4% in 2010 versus the KOSPI’s 21.8% jump.
SK Telecom shares were up 0.6% as of 08:00 am on Tuesday, underperforming the broader market’s 0.87% gain.
On Christmas eve last year, SK Telecom replaced its chief executive, Jung Man-won, and named Ha Sung-min along with So Jin-woo to lead the company.
The carrier is expected to step up its challenge against KT this year, as it plans to roll out a wide range of smartphones, including Samsung’s Galaxy S sequel and LG Electronics’ Optimus 2X.
But, an SK Telecom executive indicated that the carrier has no immediate plan to introduce the iPhone despite the launch of the gadget by Verizon in the United States.
“There is no change in our stance (regarding the iPhone),” Jang Dong-hyun, chief marketing officer of SK Telecom, told reporters on 12 January.
South Korea’s smartphone subscribers are expected to more than double to 15.8 million this year, after jumping more than 14-fold in 2010, triggered by the iPhone rollout by KT in late 2009, according to forecast from CSLA.
SK Telecom plans to launch commercial Long-term Evolution (LTE) networks in Seoul in the third quarter of this year to cope with surging data demand from users of smartphones and tablet PCs and to better compete with KT, an integrated wireline-wireless operator.
SK Telecom, which controls around half of the country’s nearly saturated mobile phone market, reported an operating profit of 453 billion won ($405.2 million) for the October-to-December period, below a mean forecast of 507.8 billion won from analysts polled by Thomson Reuters I/B/E/S.
The result was little changed from a year earlier, and a 13% fall from the previous three months.
SK Telecom saw its operating costs inch up 2% in the fourth quarter, from a year earlier.
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First Published: Tue, Jan 25 2011. 11 47 AM IST