(2nd LD) SK Telecom Q1 net misses forecast, eyes higher profit

(ATTN: RECASTS headline, throughout; ADDS CFO remarks; UPDATES share price)
SEOUL, April 29 (Yonhap) -- SK Telecom Co., South Korea's largest mobile carrier
by subscribers, said Thursday its first-quarter net profit missed the market
forecast on higher marketing fees, but forecast a profit improvement as the
government's marketing expense cap is likely to ease competition.
Net income reached 321.75 billion won (US$288.31 million) in the January-March
period, up 1.6 percent from 316.75 billion won a year ago, the Seoul-based
company said in a regulatory filing.
The bottom line was slightly lower than the median analyst estimate of 324
billion won in a survey by Yonhap Infomax, the financial news arm of Yonhap News
Agency.
Sales rose 4.9 percent on-year to 3.02 trillion won in the period, while
operating profit fell 14.8 percent to 480.47 billion won.
SK Telecom's marketing fees, including subsidies given to subscribers to ease
handset costs, rose 28 percent from a year ago to 846 billion won, driving down
its profit. The company beefed up promotions to retain subscribers and lure new
smartphone users away from the popular iPhone, which was launched by its rival at
the end of last year.
The country's No. 2 mobile carrier, KT Corp., exclusively sold over 600,000
iPhones in the approximately five months since its local debut, driving up
competition in the already saturated telecom market, where nine out of 10 people
own a cell phone.
South Korea's three mobile carriers are pushing harder to gain a larger share in
the growing smartphone segment, a key source of wireless data sales. SK Telecom
is set to release 10 new smartphone models in the current quarter to challenge
Apple Inc.'s iconic phone.
SK Telecom said its marketing efforts boosted the number of subscribers, from
which the company can draw larger wireless data sales going forward with more
South Koreans relying on mobile devices and telecom networks to use the Web.
The company controls 50.7 percent of South Korea's telecom market as of March 31
with 24.82 million mobile subscribers, up 6.3 percent on-year.
Subscribers to its smartphones, including Samsung's T-Omnia and other
Android-based phones, reached 800,000 the company said, after adding 300,000 new
users in the first quarter. The company aims to add 2 million smartphone users
this year.
The fierce market competition among the country's three mobile carriers is
expected to cool down as the government will announce a guideline to limit their
marketing costs to 22 percent of their revenue.
"We will do our best not to engage in competition to attract subscribers," Jang
Dong-hyun, the company's chief financial officer, told investors. "We will abide
by the guideline to make the government's policy effective."
Analysts said SK Telecom's profit will moderately increase in the second quarter,
boosted by data sales and lower marketing fees. But they regarded its long-term
outlook and prospects of marketing competition cautiously.
"Sales will rise on higher subscribers, but annual profit will be around last
year's level due to the increased costs," said Kim Hong-seek, an analyst at NH
Investment & Securities Co., adding that capping marketing costs will have a
limited impact on easing competition.
Investors greeted the earnings result. Shares of SK Telecom closed at 172,500 won
on the Seoul bourse, up 0.58 percent from Wednesday's close.
ylee@yna.co.kr
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