KT Corp. KT -1.20 percent said Friday its second-quarter net profit declined 43 percent from a year earlier on increased spending to upgrade its network and higher marketing costs to attract more subscribers to the faster service.
KT, South Korea’s largest fixed-line operator and second-largest mobile carrier by subscribers after SK Telecom Co., posted a net profit of KRW238 billion (US$209 million) for the three months ended June 30, down from KRW420.6 billion a year earlier.
The result was better than the KRW210 billion average forecast of five analysts polled by Dow Jones Newswires.
Operating profit dropped 14 percent to KRW371.7 billion from KRW432.4 billion while sales rose 8.1 percent to KRW5.773 trillion from KRW5.343 trillion.
South Korean mobile operators struggled over the past year as their spending increased sharply due to the deployment of ultra-fast network technology nationwide. Their marketing costs also rose in order to lure more subscribers to the new network service to fatten their profits.
A government-led campaign last year, which urged telecom firms to cut their mobile fees to ease rising inflation, also hit the companies’ bottom lines.
On Friday, KT Corp. also said it raised its annual capital investment target to KRW3.8 trillion this year from the KRW3.5 trillion set previously, largely due to increased spending on the ultra-fast network technology, called long-term evolution, or LTE.
Analysts expect the country’s mobile operators to see higher profits in the coming quarters, driven by an increased number of users for the high-margin LTE services as more LTE-planted smartphone models are expected to be released toward the end of the year.
The analysts also expect higher profits at KT’s non-telecom businesses, including media and credit cards.
Second-quarter average rate per user, or ARPU, for wireless services, including voice and mobile data, fell to KRW29,447 from KRW30,178 a year earlier.