SK Telecom Q2 net drops 74% on lower phone fees, higher marketing costs

Analysts expect earnings to improve through remainder of year as high-speed broadband service boosts ARPU.

SK Telecom Co., South Korea’s largest mobile carrier by subscribers, said Thursday second-quarter net profit fell 74% from a year earlier as lower phone fees and higher marketing costs to promote faster network technology weighed on its bottom line.
For the three months ended June 30 SK Telecom posted a net profit of 120.6 billion won (US$106.8 million), down from a KRW465.4 billion profit, the mobile operator said.
The result was worse than the average KRW188 billion net profit forecast of five analysts recently polled by Dow Jones Newswires.
Operating profit also fell 43% to KRW384.6 billion from KRW672.9 billion while sales fell 0.6% to KRW4.015 trillion from KRW4.038 trillion.
Analysts expect SK Telecom’s earnings likely bottomed in the second quarter and will improve during the remainder of the year as a continued increase in subscribers of a high-speed-network service will likely help lift the company’s average revenue per user–a key performance metric for telecom operators.
Overall average revenue per user, or ARPU, fell to KRW39,729 in the second quarter from KRW40,738 a year earlier.
SK Telecom Chief Financial Officer Ahn Seung-yun said with wider adoption of LTE-enabled smartphones in the coming months, the company expects stronger growth ahead.
The company said LTE subscribers exceeded 4.22 million at the end of July after launching the service a year ago. The company aims to secure 7 million LTE subscribers by the end of the year.
Last year, the South Korean government urged mobile operators to slash phone fees as part of nationwide efforts to fight inflation.