SKT, LG U+ post profit slumps

Dylan Bushell-Embling
30 Apr 2014

Both SK Telecom and LG U+ have reported steep declines in first-quarter net profit, due to rising marketing expenses, as well as the impact of compensation costs and regulatory penalties respectively.

SK Telecom has announced a 22.7% slump in net profit to 267.3 billion won ($259.5 million). Operating income also fell 37.6% to 252.4 billion won.

The operator blamed a temporary increase in marketing expenses arising from the launch of its new T Phone dialer for Android and new customized optional data plans. Compensation paid over the operator's recent mobile network failure also contributed to the decline.

Revenue by contrast grew 3.4% year-on-year to 4.202 trillion won, thanks largely to LTE gains.

The company's LTE and LTE-A subscriber base grew to 14.77 million by the end of March, which represents 53% of the company's total mobile customers. SK Telecom expects this proportion to rise to two thirds by the end of the year.

SK Telecom's enterprise business also increased its sales by 38% year-on-year to 115.5 billion won.

Rival LG U+ meanwhile disclosed that its net profit for the quarter halved to 26.8 billion won, Korea JoongAng Dailyreported.

Operating profit fell 8.1% to 113.2 billion won, and sales were down 2.8% to 2.78 trillion won.

LG U+ also partially blamed higher marketing costs for the declines – the company spent 551.1 billion on marketing during the quarter, up 22.6% year-on-year.

The 45-day business suspension imposed by the government in March also impacted the operator's performance.

The government ordered suspensions on signing up new customers for all three operators due to their repeated practice of violating the limit on handset subsidies in attempts to poach each others' customers. SK Telecom's suspension did not start until after the first quarter.

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