Profit Shrunk
South Korea’s No. 2 mobile carrier KT announced on November 1 that it posted 5.83 trillion won (US$5.23 billion) in sales and 377.3 billion won (US$338.39 million) in the third quarter. Its sales increased 5.4 percent compared to a year earlier but its operating profit decreased 6.1 percent.
The company’s performance declined largely due to higher marketing costs and broadcasting development fund. KT raised 1.5 percent of its IPTV and satellite broadcasting sales for the fund in the third quarter according to the revised framework Act on Broadcasting Communications Development. The fund was worth 16 billion won (US$14.35 million) last year but the combined fund of the two companies stood at 24 billion won (US$21.52 million) this year, up 8 billion won (US$7.17 million).
KT’s marketing costs grew as well. The company boosted marketing costs to sell out its remaining inventories in July and August as the 25 percent discount rate has been applied from September 15 and the upper limit of the subsidy for purchase of a mobile phone has been abolished in October. Accordingly, KT spent a total of 592.1 billion won (US$531.03 million) on marketing activities by expanding subsidies on changing devices which have been launched in the market 15 months ago, though it was before new premium phones, including the Galaxy Note 8, released in the third quarter. The figure was 23.6 percent up compared to same period last year.
KT's chief financial officer (CFO) Shin Kwang-seok said, “Due to the policy that lowers household expenditure on telecommunication services, it is inevitable for the company to decrease sales. However, we are planning to make a steady growth in major businesses by seeking out a new opportunity. Most of all, we will make an every effort to develop services that are necessary for customers, just like artificial intelligence TV GiGA Genie, based on innovative technology for human and create a new growth engine.”