KOREA here's the rev report Can you sa y $100/shr TOMORROW oh my!!
* Revenues increased 755% year-over-year (YoY)
Korea Thrunet Announces 3rd Quarter Results for the
Period
Ended September 30, 1999
PR Newswire - December 16, 1999 16:28
SEOUL, and NEW YORK, Dec. 16 /PRNewswire/ -- The
following was issued today by Korea
Thrunet Co., Ltd.:
Korea Thrunet Co., Ltd. (Nasdaq: KOREA) ("Korea
Thrunet"), Korea's leading broadband
Internet-access services provider and one of the leading
data communications providers, today
announced the results of its operations for the third
quarter ending September 30, 1999. All figures
were unaudited and prepared in accordance with
generally accepted accounting principles in the United
States for interim financial information.
3Q99 Results Summary: Year-over-Year and
Quarter-over-Quarter Comparison Highlights
* Revenues increased 755% year-over-year (YoY) and
31% quarter-over-
quarter (QoQ) to KRW 20,331 million primarily due to
an increase in the
number of end users for broadband Internet and the
number of fiber optic
dedicated lines leased.
* Revenues from Broadband Internet Service increased
9,543% YoY and 80%
QoQ to KRW 6,913 million.
* Revenues from Data Communications Service
increased 482% YoY and 15% QoQ
to KRW 13,417 million.
* Total number of end users for Broadband Internet
Service increased
5,038% YoY and 53% QoQ to 90,693.
* Of 90,693 total subscribers, the number of residential
end users
increased 2,114% YoY and 79% QoQ to 26,143. The
number of commercial
end users increased 10,953% YoY and 44% QoQ to
64,550.
Business Outlook
Korea Thrunet, as a first mover in one of the fastest
growing Internet markets in Asia, has retained very
strong brand name recognition among residential and
commercial customers in Korea, and accumulated
invaluable technical expertise and know-how. Taking
full advantage of our leading position and
capitalizing on the rapid growth in demand for Internet
services, our immediate strategy focuses on the
expansion of our subscriber base.
Following Korea Thrunet's listing on Nasdaq, we have
experienced an increasingly rapid growth in our
residential subscribers. We believe one of the key
drivers for the subscriber growth is expansion of our
relationship with cable system operators and enhanced
service coverage. As one of the three marketing
channels of our broadband Internet services, we will
continue expanding our exclusive agreements with
cable system operators beyond the current 33 partners.
We will also expand our service coverage not
only in KEPCO's(1) cable network areas, but also in
areas outside of KEPCO's network by deploying
our own hybrid-fiber-coaxial cable (HFC) network.
During the current fourth quarter, we have introduced
several new Internet services. This includes free
Internet access to the Korea Thrunet web page for e-mail
accounts and personal home pages, Open
Bulletin Board Service for multimedia bulletin board,
and True Box Service as a virtual mail box. We
believe these services will play a very important role in
creating and expanding the virtual Thrunet
community and will increase our pageviews, leading to a
larger subscriber base.
In our data communications services, we believe our
local fiber optic network will facilitate the delivery
of broadband Internet access services to our 150 existing
data communications service customers as
well as potential customers. In November, we officially
launched Thrunet Alpha Service targeting large
corporations, enabling them to access the Internet via
dedicated fiber optic lines directly connected to
their premises.
The statements included above and elsewhere in this
press release that are not historical in nature are
"forward-looking statements" within the meaning of the
"safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Korea Thrunet cautions
readers that forward-looking statements are
based on the Company's current expectations and
involve a number of risks and uncertainties. Actual
results may differ materially from those contained in
such forward-looking statements. Information as to
those factors that could cause actual results to vary can
be found in Korea Thrunet's Initial Public
Offering Registration Statement filed with the United
States Securities and Exchange Commission on
November 17, 1999, as amended, or Risk Factors section
of the Offering Prospectus.
Operating Highlights
Strong Revenue Growth:
Due primarily to steady but strong growth in data
communications services, and a dramatic increase in
revenues from broadband Internet services, Korea
Thrunet experienced strong revenue growth in 3rd
quarter, 1999 ("3Q99"). In particular, the proportion of
revenues from broadband Internet services is
growing rapidly from 25% in 2nd quarter, 1999
("2Q99") to 34% in 3Q99. During this period, the
number of our broadband Internet end users increased
by 53% from 59,347 in 2Q99 to 90,693 in
3Q99. As of November 30, 1999, we have 112,995 end
users and 47,817 accounts.
Increase in Bandwidth Capacity and Ancillary Facilities
Lease Fee Rates:
Effective July 1, 1999, KEPCO increased lease fee rates
charged on bandwidth capacity, and on
ancillary facilities that we lease from KEPCO. The rate
increase only applies to the lease agreement
stipulating bandwidth capacity and ancillary facilities,
and does not affect our cable network lease
contract. As a result, the amount of lease payments to
KEPCO for data communications business
increased by 53% to KRW 10,122 million in 3Q99 from
KRW 6,622 in 2Q99.
On December 14, 1999, KEPCO agreed that it will lower
lease fee rates to the pre-July 1, 1999 level,
with retroactive adjustment from July 1, 1999. KEPCO
will reimburse Korea Thrunet for the difference
in the lease fees. The reestablishment of lower lease fee
rates will result in a decrease of KRW 3.4
billion in operating costs for 3Q99.
Microsoft Investment:
In September 1999, Microsoft Corporation made an
equity investment in Korea Thrunet of
approximately US$10 million. Subsequent to this
investment, Microsoft had 5.4% stake in Korea
Thrunet as of September 30, 1999. Subsequently,
Microsoft purchased 4,525,714 additional shares of
Korea Thrunet by exercising an option following our
IPO in November. In October 1999, we entered
into a Business Cooperation Agreement with Microsoft,
which provides a framework for cooperation in
a broad range of business activities, including joint
development of content for the Korean market, new
broadband services and content, portal and content
co-branding, content aggregation and e-commerce
applications.
Year 2000 Compliance:
Korea Thrunet completed its Y2K compliance
procedures in August 1999, by upgrading or replacing
the hardware and software that we had identified as
non-compliant for Y2K purposes. We have also
contacted our third-party vendors, licensors and
providers of software, hardware, content and services
regarding their Y2K readiness. KEPCO, our principal
supplier of the fiber optic network, has assured
us that its nationwide fiber optic network is Y2K
compliant. We have identified scenarios requiring
contingency plans, and designated personnel responsible
for coordinating the necessary contingency
plans, in the event of such occurrence. We estimate that
the total cost of addressing the Y2K problem
will be approximately KRW 1,250 million, including
approximately KRW 200 million reserve for
contingency planning. As of the end of 3Q99, we have
spent KRW 526 million in the aggregate.
3Q99 Financial Results: Year-over-Year and
Quarter-over-Quarter Comparison
Income Statement
Revenues
Revenues in 3Q99 totaled KRW 20,331 million, up 755%
compared to KRW 2,377 million in 3Q98
and up 31% compared with KRW 15,506 in 2Q99.
Revenues from Broadband Internet Service, Thrunet
Service, increased 9,543% to KRW 6,913 million
in 3Q99 from KRW 72 million in 3Q98 and 80% from
KRW 3,846 million in 2Q99. The number of
Thrunet Service end users increased by 5,038% from
1,765 as of 3Q98 to 90,693 as of 3Q99 and by
53% from 59,347 as of 2Q99.
Revenues from Data Communications Service increased
482% from KRW 2,305 million in 3Q98 and
15% from KRW 11,660 million in 2Q99 to KRW 13,417
million in 3Q99. The increase in our data
communications services revenues was due to a
substantial increase in the number of lines leased and
average sales per leased line. The number of lines leased
increased 390% from 2,321 in 3Q98 and
24% from 9,180 in 2Q99 to 11,372 in 3Q99.
Operating Costs
Our operating costs in 3Q99 totaled KRW 17,771
million, up 502% from KRW 2,950 million in 3Q98
and up 44% from KRW 12,351 in 2Q99. However, our
operating costs as a percentage of total
revenues have decreased to 87.4% in 3Q99 from 124.1%
in 3Q98 and increased from 79.7% in
2Q99. The increase in operating costs was due to higher
lease payments made to KEPCO for our
broadband Internet service and data communications
service. Lease payments to KEPCO increased
804% to KRW 11,803 million in 3Q99 from KRW 1,305
million in 3Q98 and 57% from KRW 7,440
million in 2Q99. The increase was due primarily to a
substantial increase in our utilization of KEPCO's
fiber optic and HFC network, and an increase in lease
fee rates for bandwidth capacity and ancillary
facilities.
Selling, General and Administrative Expense
While selling, general and administrative expense
increased by 164% from KRW 1,772 million in 3Q98
to KRW 4,685 million in 3Q99 and down by 4% from
4,896 million in 2Q99, SG&A was 23.0% of
total revenues in 3Q99 compared to 74.6% in 3Q98.
Year-to-Year increase in selling, general and
administrative expense reflected 202% increase in
advertising from KRW 355 million in 3Q98 to KRW
1,069 million in 3Q99, primarily due to substantial
increases in television and newspaper advertisements
following the launch of Thrunet Service.
Quarter-to-Quarter decrease in selling, general and
administrative expense was primarily due to decrease in
advertising and R&D costs. Advertising costs
decreased by 34% from KRW 1,609 million and R&D
costs decreased by 32% from KRW 1,002
million.
Depreciation and Amortization Expense
Depreciation and amortization expense increased 296%
from KRW 1,688 million in 3Q98 and 36%
from KRW 4,925 million in 2Q99 to KRW 6,685 million
in 3Q99, primarily as a result of our
investment in additional local fiber optic network.
Operating Loss
Operating loss increased 32% from KRW 6,666 million
in 2Q99 and increased 118% from KRW
4,034 million in 3Q98 to KRW 8,810 million in 3Q99.
Operating loss ratio against revenue for 3Q99
was -43.3% compared to -169.7% in 3Q98 and -43.0% in
2Q99.
Other Income (Deductions)
We had other deductions of KRW 9,201 million in
3Q99, primarily reflecting substantial interest
expense. We also had other deductions of KRW 2,345
million in 2Q99, primarily due to interest
expense. On the other hand, we had other income of
KRW 1,166 million in 3Q98, primarily as a result
of interest income and foreign exchange transaction
gains, offset in part by interest expense. Interest
income decreased 40% from KRW 2,162 million in
3Q98 and 16% from KRW 1,539 million in 2Q99
to KRW 1,290 million in 3Q99, primarily reflecting a
34% decrease in the average amount of our
domestic deposits from KRW 97,367 million in 3Q98
and 12% decrease from KRW 72,799 million in
2Q99 to KRW 64,389 million in 3Q99. Interest expense
increased 217% to KRW 6,487 million in
3Q99 from KRW 2,047 million in 3Q98 and 9.6% from
KRW 5,918 million in 2Q99. The increase
was primarily due to a 104% increase in aggregate
outstanding indebtedness to KRW 253,362 million
in 3Q99 from KRW 123,949 million in 3Q98 and 18%
increase from KRW 215,243 million in 2Q99.
Income Tax
We had an income tax benefit of KRW 81,619 million in
3Q99, KRW 34 million in 3Q98 and KRW
73 million in 2Q99. On an interim basis, we provide for
income tax expense or benefit based on our
estimate of the annual effective tax rate for the full fiscal
year.
Net Loss
Net loss increased 121% to KRW 19,748 million in 3Q99
from KRW 8,938 million in 2Q99 and
increased 597% from KRW 2,834 million in 3Q98. Loss
per share of common stock increased 120%
to KRW 372 in 3Q99 from KRW 169 in 2Q99 and
increased 593% from KRW 54 in 3Q98.
Balance Sheet
Investment in Hanaro Telecom Inc.
In August, 1999, Korea Thrunet made an additional
investment in Hanaro Telecom by purchasing
2,878,866 shares at KRW 11,800 per share. This is in
addition to our original investment in Hanaro
Telecom of 9.8 million shares at par value, KRW 5,000.
Based on the market value of these shares as
of September 30, 1999, in 3Q99 the Company recorded
unrealized valuation gain of total KRW 156
billion on the total holdings in Hanaro Telecom. This
includes KRW 21 billion unrealized gain on the
new investment and KRW 135 billion on the original
investment.
The market value adjustment of Hanaro shares was
made during 3Q99 because major shareholders of
Hanaro agreed in September 1999 to remove Hanaro
Shareholders Agreement which had restricted
free sale of Hanaro shares.
Capital Expenditure
Our investment in 3Q99 for facilities was KRW 44,688
million in total, including KRW 19,015 million
for broadband Internet service and KRW 25,673 million
for data communications services.
Stronger Capital Structure
On November 17, 1999, Korea Thrunet listed its Class A
common shares through an initial public
offering (IPO) on Nasdaq. Korea Thrunet offered
11,615,000 shares including a full exercise of an
over-allotment option at US$18.00 per share. Net
proceeds after underwriting discount was US$194.4
million, or KRW 228,228 million.
On November 23, 1999, Microsoft Corporation, our
principal technology partner, exercised their
option to purchase 4,525,714 shares at US $8.08 or KRW
9,350 per share. As a result, Microsoft's
share ownership of Korea Thrunet increased from 5.4%
in September to 10.5%.
Leaving all other factors unchanged and applying IPO
and MSFT investment only in the current 3Q99
balance sheet, the result is as follows:
3Q99 Applying IPO & MSFT
investment only
(KRW in mil.) (KRW in mil.)
Total Liabilities 395,696 391,449
Total Stockholders' Equity 266,507 537,050
Common Stock 139,543 179,894
Additional Paid-in Capital 52,599 282,791
Accumulated Deficit (47,555) (47,555)
Loans to Employees to
Acquire Common Stock (1,506) (1,506)
Accumulated Other
Comprehensive Income 123,426 123,426
Debt-to-Equity Ratio 148.5% 72.9%
Company Information
Founded in July, 1996, Korea Thrunet Co., Ltd. is the
leading provider of high-speed Internet services
in Korea, with 90,693 end users as of September 30,
1999. Thrunet service features "always-on"
Internet access at speeds up to 100 times faster than
traditional dial-up Internet access, with compelling
multimedia content ranging from on-demand music
videos and Internet telephony to multimedia bulletin
board and multimedia chatting services. Korea Thrunet
also provides facilities-based data
communications services to 150 corporate customers in
Korea, including several major
telecommunications carriers such as SK Telecom Co.
Ltd. and Shinsegi Telecom Inc.
Corporate Headquarters:
Korea Thrunet's principal offices are located at 1338-5,
Seocho-2 dong,
Seocho-ku, Seoul, Korea 137-072.
Phone: 822-3488-8058 Fax: 822-3488-8511
thrunet.com
(1) Korea Electric Power Corporation ("KEPCO").
Korea Thrunet currently
leases substantially all of its cable network and the
bandwidth
capacity for its fiber optic Internet backbone from
KEPCO.
KOREA THRUNET CO., LTD.
BALANCE SHEETS
As of Sep. 30, 1999, Sep. 30, 1998 and Jun. 30, 1999
(In thousands of Korean Won and U.S. Dollars)
09/30/99 (Unaudited)
ASSETS USD KRW %
Current Assets:
Cash and cash equivalents 31,910,095 38,834,585 6%
Marketable securities 2,612,983 3,180,000 0%
Accounts receivable, less
allowance for
doubtful accounts 7,002,881 8,522,506 1%
Prepaid value-added taxes 3,315,408 4,034,851 1%
Other current assets 3,559,395 4,331,783 1%
Total current assets 48,400,761 58,903,726 9%
Investments 246,863,105 300,432,399 45%
Property and equipment:
Land 5,852,479 7,122,467 1%
Buildings and structures 4,190,081 5,099,328 1%
Communication circuit
equipment 80,760,929 98,286,051 15%
Transmission and
communications equipment 92,918,607 113,081,945 17%
Furniture and tools 4,693,033 5,711,421 1%
Construction in progress 14,105,515 17,166,411 3%
202,520,643 246,467,623 37%
Less accumulated
depreciation (17,237,180) (20,977,648) -3%
Net property
and equipment 185,283,463 225,489,974 34%
Leased line license,
net of amortization 14,589,154 17,755,000 3%
Intangible asset -
Microsoft stock option 35,147,548 42,774,566 6%
Other assets 13,842,979 16,846,905 3%
TOTAL ASSETS 544,127,010 662,202,571 100%
LIABILITIES
Current Liabilities:
Short-term borrowings 29,654,493 36,089,518 5%
Current portion of
long-term debt 21,058,340 25,628,000 4%
Accounts payable 28,589,378 34,793,273 5%
Accrued expenses 12,498,282 15,210,409 2%
Other current liabilities 1,043,073 1,269,420 0%
Total current
liabilities 92,843,566 112,990,620 17%
Bonds 102,340,366 124,548,226 19%
Long-term debt,
excluding current
portion 82,901,397 100,891,000 15%
Deferred tax
liabilities 45,445,803 55,307,543 8%
Retirement and severance
benefits, less transfers to
National Pension Fund 1,258,040 1,531,035 0%
Other long-term liabilities 351,360 427,605 0%
TOTAL LIABILITIES 325,140,533 395,696,028 60%
Stockholders' Equity:
Common stock 114,661,348 139,542,860 21%
Additional paid-in
capital 43,220,226 52,599,015 8%
Accumulated deficit (39,075,807) (47,555,258) -7%
Loans to employees to
acquire common stock (1,237,255) (1,505,739) 0%
Accumulated other
comprehensive income 101,417,965 123,425,664 19%
TOTAL STOCKHOLDERS'
EQUITY 218,986,477 266,506,543 40%
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 544,127,010 662,202,571
100%
09/30/98 (Unaudited) 06/30/99 (Unaudited)
ASSETS KRW % KRW %
Current Assets:
Cash and cash
equivalents 60,056,453 22% 62,332,936 15%
Marketable
securities -- 0% -- 0%
Accounts receivable,
less allowance for
doubtful accounts 1,138,020 0% 6,286,976 2%
Prepaid value-added
taxes 1,753,470 1% 3,021,379 1%
Other current
assets 4,781,758 2% 1,995,102 0%
Total current
assets 67,729,700 24% 73,636,393 18%
Investments 85,915,693 31% 117,858,635 29%
Property and equipment:
Land 7,122,467 3% 7,122,467 2%
Buildings and
structures 5,099,328 2% 5,099,328 1%
Communication circuit
equipment 2,607,310 1% 84,406,738 20%
Transmission and
communications
equipment 12,941,957 5% 86,228,890 21%
Furniture and
tools 4,108,252 1% 4,917,204 1%
Construction
in progress 70,736,521 25% 13,101,833 3%
102,615,835 37% 200,876,460 49%
Less accumulated
depreciation (3,884,086) -1% (14,913,236) -4%
Net property
and equipment 98,731,749 35% 185,963,224 45%
Leased line license,
net of
amortization 18,815,000 7% 18,020,000 4% |
