South Korea’s largest mobile operator SK Telecom saw its Q1 profit jump sharply, but revenue slowed due to the government phasing out activation fees and lowering interconnect rates.
The operator’s net income jumped 65.6 per cent to KRW442.7 billion ($409 million), with its SK Hynix unit continuing to deliver strong earnings. Operating income increased 59.5 per cent to KRW402.7 billion year-on-year but dropped 17.8 per cent quarter-on-quarter as expenses rose sharply.
The company, which has almost a 50 per cent share of South Korea’s mobile market, said in a statement that it experienced “a temporary decrease in operating income in Q1 due to a sharp increase in marketing expenses in the abnormally overheated market and the payment of compensation for the network failure incident last year”.
Revenue inched up just 0.9 per cent year-on-year to KRW4.240 trillion as sales were impacted by the elimination of sign-up fees and a fall in network interconnect revenue after the rate was reduced last year. Mobile service revenue dipped 1.2 per cent to KRW2.73 trillion during the period.
Overall operating expenses fell 2.8 per cent to KRW3.83 trillion, with interconnect expenses declining 15 per cent to KRW234 billion. Marketing expenses also dropped sharply from a year ago and were down 23.2 per cent year-on-year to KRW846 billion, as the government’s subsidy restrictions announced in October curbed promotions.
ARPU was down 0.6 per cent to KWR43,479 ($40.22) from a year ago and was down 0.4 per cent from Q4. Churn improved, dropping from 2.5 per cent in Q1 2014 to 2.0 per cent in the last quarter.
LTE subscribers rose 18 per cent to 17.45 million and now account for 61 per cent of its mobile subscriber base of 28.4 million, which is up 2 per cent from Q1 2014.
Capex during the quarter rose 20.5 per cent to KRW319 billion and accounted for 10.2 per cent of operating revenue – up from 8.1 per cent last year. It deployed 26,000 2.1GHz base stations and now offers tri-band LTE-Advanced service in the business districts of 85 cities.
Its EBITDA margin rose 4 points to 26.7 per cent from a year ago.
Last month the operator announced a new growth strategy that focuses on three platforms – lifestyle enhancement, advanced media and IoT service — with the aim of finding sustained growth in South Korea’s rapidly changing telecoms market.
The company’s CFO, Lee Yong-hwan, said the company will shift its competitive focus through the “three next-generation platforms to improve its profitability and secure new growth momentum”.