South Korea’s largest operator SK Telecom reported an 11.8 per cent jump in its net profit for 2014 due to strong LTE subscriber growth and equity gains from SK Hynix.
The operator, which has a 49 per cent market share, added 3.7 million LTE connections in 2014. LTE subscribers now account for about 58 per cent (16.73 million) of its 27.6 million mobile connections. ARPU rose 4.5 per cent to KRW36,100 ($33.20).
Its net profit last year hit KRW1.799 trillion ($1.65 billion), supported by a KRW916.4 billion gain from SK Hynix’s strong performance, while its revenue increased 3.4 per cent to KRW17.16 trillion.
On the downside, its operating income fell 9.2 per cent to KRW1.83 trillion as marketing expenses climbed 4.2 per cent to KRW3.57 trillion due to fierce competition and a new regulation limiting handset subsidies to KRW350,000. It was also hit by a 50 per cent cut in activation fees last August. The company, along with all mobile operators, has to eliminate the fees by November.
Operating expenses rose 5.1 per cent to KRW15.34 trillion. Labour cost were up 6.3 per cent, while the cost of goods sold increased almost 30 per cent in line with growth in product sales.
SKT said its annual churn rate dropped to 2 per cent (from 2.3 per cent in 2013) — the lowest rate since 2006. Smartphone penetration was stable at about 70 per cent throughout the year.
Capex was cut 7.4 per cent to KRW2.1 trillion (16.5 per cent of revenue compared to 18 per cent in 2013) and is expected to stabilise this year.
The company’s EBITDA was down 2.4 per cent to KRW4.71 trillion, and its EBITDA margin dropped 1.6 points to 27.5 per cent from a year ago.