South Korea’s second largest mobile operator KT posted a healthy gain in profit for Q1, but operating revenue rose only slightly as strong merchandise sales helped offset a decline in mobile turnover.

The operator’s net profit for Q1 rose 4.3 per cent year-on-year to KRW215 billion ($185 million).

Strong growth in equipment sales, up 7.7 per cent year-on-year to KRW616 billion, helped drive a 1.8 per cent rise in overall operating revenue to KRW5.52 trillion. Service revenue grew 1 per cent to KRW4.9 trillion, with wireless turnover falling 3.1 per cent to KRW1.85 trillion due to the elimination of activation fees and a reduction in interconnection charges.

Sales in KT’s media and content units, which include IPTV and e-commerce services, grew 16.6 per cent to KRW520 billion. Fixed-line revenue was down 1.9 per cent to KRW1.25 trillion, with broadband up 4.4 per cent to KRW496 billion but telephony falling 8 per cent to KRW490 billion.

The operator added 1.4 million 4G subscribers over the last year, ending Q1 with 14.6 million LTE subs and taking penetration to 76 per cent. Its total mobile subscriber base increased 5.8 per cent year-on-year to 19.2 million.

ARPU dropped 1.2 per cent from Q1 2016 to KRW34,062 in the recent quarter.

Its capex guidance for 2017 is KRW2.4 trillion, which is about the same level as the past two years. Nearly 50 per cent of the budget is allocated for access networks. Q1 capex was KRW313 billion.