Today's 4Q results announcement could be what KOREA needs:
PR Newswire, Monday, March 13, 2000 at 18:40
SEOUL and NEW YORK, March 13 /PRNewswire/ -- Korea Thrunet Co., Ltd. announced the following today:
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 fourth quarter ending December 31, 1999. All figures were unaudited and prepared in accordance with generally accepted accounting principles in the United States.
Main Topics Discussed in This Release:
-- Business Outlook
-- Operating Highlights
-- 4Q Financial Results: Year-over-Year and Quarter-over-Quarter
Comparison
-- 12 Months 1999 Results: Year-over-Year Comparison
Business Outlook
Korea Thrunet continues to solidify its position as a leading broadband Internet service provider in Korea by steadily growing its broadband subscriber base. To that end, it is investing heavily in alternate broadband access and device technologies. At the same time, it is aggressively moving beyond broadband access by expanding its 4Cs (communication, content, community, and commerce) offerings.
On the broadband access side, Korea Thrunet grew its subscriber base to over 200,000 paying subscribers as of Mar. 13, 2000. During the first two months of this year, it has added 26,000 subscribers a month compared to 15,000 subscribers a month in 4Q99. There is currently a backlog of over 100,000 subscribers.
Korea Thrunet continues to expand its network coverage. It has achieved 5.3 million homes passed well ahead of its competition -- 2.8 million homes passed through the KEPCO network and 2.5 million homes passed in non-KEPCO areas through its own network, covering 37% of total number of households in Korea. To reduce its dependence of KEPCO network, Korea Thrunet has secured independent nationwide IP backbone, local loops in major metropolitan areas, and last mile coverage in most densely populated urban areas.
To secure IP network infrastructure competitiveness, Korea Thrunet signed a strategic alliance with Cisco Systems on February 28, 2000. Under terms of the agreement, Korea Thrunet will leverage Cisco technology and services to deploy next generation IP infrastructure that integrates combined voice, video and data traffic together with new broadband services and applications.
Leveraging and moving beyond its leadership position in the broadband access, Korea Thrunet has begun implementing its aggressive multi-access, mega-portal strategy. As a part of its longer-term growth strategy, it is strengthening its 4Cs (communication, community, content, and commerce) offerings. Korea Thrunet currently has 1.4 million users in addition to broadband access subscribers: 600K Thrunet.com (broadband portal) members; 210K dvvb.com (MMBBS service) members; and 590K Metaland.com (e-commerce) members. On communication, it has launched a Unified Messaging Service called Truebox and is in the process of forming a Joint Venture with Nissi Corporation of U.S.A. To build its multimedia communities, it is using its unique MMBBS (Multimedia Bulletin Board Service) called dvvb.com. To differentiate its multimedia content offering, it is leveraging its leadership position in the broadband market in acquiring and aggregating content from both domestic and global players. On commerce, it is planning to increase its shareholding in Metaland to 30% to integrate its e-commerce customers, offerings as well as revenues. Metaland's revenues in 1999 was KRW 2.5 billion. To increase advertising revenues, Korea Thrunet has created a new Adverting Sales function to focus on integrating our offerings to key advertisers.
On January 14, Korea Thrunet acquired Nowcom Co., Ltd, a #4 on-line service provider in Korea with 1.5 million end-users and significant user-generated content and communities. Post-acquisition integration is underway to share customers, content, infrastructure, and capabilities as well as to reduce redundant costs.
With the aim of becoming the dominant multi-access, mega portal in Korea, Korea Thrunet purchased the domain name, Korea.com on February 2000. It is planning to integrate and strengthen the existing 4C offerings under Korea.com as the mega portal brand. The Company will unveil a detailed strategy within two months and it is anticipated that Korea.com will be launched during the summer.
To successfully execute its strategy, Korea Thrunet is aggressively adding top caliber professionals to its management team: Jae H. Lee, a BCG partner, as the head of Internet business; Charles Rim, a Citicorp Vice President, as the CFO; and Yonghoe Kim, a BCG Project Manager, as the CSO.
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 Subscriber Growth:
The number of paying subscribers showed a significant growth in 4Q99 ending the year with a total of 134,740. The number of subscribers for broadband Internet service in 4Q99 grew by 1,022% from 12,012 in 4Q98 and by 49% from 90,693 in 3Q99, solidifying our position as the leading broadband Internet service provider in the Korean market with approximately 50% of total market share (excluding ISDN). We feel very confident and pleased with stronger-than-expected subscriber growth and believe the following strategic initiatives contributed to our successful growth.
Upgrading Internet Backbone:
During the fourth quarter, we upgraded our Internet backbone. We have designed the network by leasing dark fiber and installing our own Giga-bit Ethernet switch equipment carrying out both transmission and routing functions at the same time.
Completion of our new Internet backbone will enable us to offer more reliable services to our subscribers. One of the benefits of our new backbone is the ability to provide our customers the speed at giga bit per second without incurring additional bandwidth leasing costs.
Relationship with Cable System Operators:
In late December 1999, Korea Thrunet acquired equity ownership in 7 regional cable system operators in Korea with the ownership ratios ranging from 9.2% to 100%. The total investment was KRW 49.4 billion or approximately US$ 42.9 million. Through this investment, we acquired 5 cable system operators with majority control or over 50% ownership. After the investment in cable system operators, Korea Thrunet has exclusive agreements with 42 out of 77 cable system operators in Korea.
Currently, Korea Thrunet and system operators cooperate in their regional co-marketing, customer maintenance and installation. We believe that the direct equity ownership in system operators would help us achieve the following objectives: 1) further enhance the quality of its services, 2) expand its service coverage, and 3) secure provision of more reliable network for broadband Internet service.
Strong Advertising:
The Company launched its first ever television ad campaign and increased spending substantially in other advertising mediums in December and overall service promotions in the 4Q, resulting in 21,745 new subscribers in December compared to the previous monthly high in November 1999 of 14,117, and the previous monthly average of 8,742 during the first 3 quarters of 1999. The higher growth rate in subscribers has continued into the first two months of year 2000.
Launching New Services:
Open Bulletin Board Service ("dvvb Service") The Company launched in 4Q99 "Open Bulletin Board Service" under the brand name of "dvvb Service" which is the first in Korea. One of the most fascinating characteristics of "dvvb Service" is that customers can create and search through our multimedia bulletin board at any time and anywhere not only via wired network, but also via mobile phones with built-in Internet browsers for wireless Internet. Adding this latest service to the existing business line-up of Korea Thrunet, we are targeting more than 20 million Korean cellular subscribers in addition to 10 million existing wired Internet users in Korea and bringing them into our Thrunet community.
4Q99 Financial Results: Year-over-Year and Quarter-over-Quarter Comparison
Highlights
-- Revenues increased 356% YoY and 16% QoQ to KRW 23,529 million.
-- Revenues from Broadband Internet Service increased 987% YoY and 11% QoQ
to KRW 7,704 million.
-- Revenues from Data Communications Service increased 255% YoY and 18%
QoQ to KRW 15,825 million.
-- Total number of subscribers for Broadband Internet Service increased
1,022% YoY and 49% QoQ to 134,740.
-- Of 134,740 total subscribers, the number of residential subscribers
increased 1,508% YoY and 142% QoQ to 63,327. The number of commercial
subscribers increased 784% YoY and 11% QoQ to 71,413.
Revenues
Revenues in 4Q99 totaled KRW 23,529 million, up by 356% compared to KRW 5,165 million in 4Q98 and up by 16% compared to KRW 20,331 million in 3Q99.
Revenues from Broadband Internet Services increased by 987% to KRW 7,704 million in 4Q99 from 4Q98 and by 11% from 3Q99. This was primarily due to the strong growth of broadband Internet service subscribers, up by 1,022% from 12,012 subscribers as of Dec. 31, 1998 and up by 49% from 90,693 end users to 134,740 end users as of Dec. 31, 1999.
Revenues from Data Communications Services for 4Q99 increased by 255% YoY (Year-over-Year) and by 18% QoQ (Quarter-over-Quarter), due to a substantial increase in the number of dedicated lines leased, increasing by 261% from 3,972 lines in 4Q98 and by 26% QoQ to 14,329 lines in 4Q99.
Operating Costs
Our operating costs in 4Q99 totaled KRW 19,217 million, up by 380% YoY and up by 8% QoQ. Network lease payments for broadband Internet services and data communications services increased 247% to KRW 7,973 million in 4Q99 from KRW 2,298 million in 4Q98, mainly due to a substantial increase in our utilization of KEPCO's (Korea Electric Power Corporation) fiber optic and HFC (Hybrid Fiber Coaxial) network. However, network lease payments decreased by 33% QoQ mainly because KEPCO agreed that it would lower lease fee rates back to the pre-July 1, 1999 level (Effective July 1, KEPCO previously increased lease fee rates for backbone bandwidth capacity on the leased line portion and on ancillary facilities such as electric poles, ducts and nodes, which we lease from KEPCO). Accordingly, network lease payments as a percentage of total revenues have decreased to 34% in 4Q99 from 59% in 3Q99.
Selling, General and Administrative Expense
Selling, general and administrative (SG&A) expense increased by 314% YoY to KRW 12,787 million in 4Q99 and increased by 173% QoQ. QoQ increase in SG&A expenses include a 402% increase in advertising, primarily due to substantial increases in TV commercials and other medium such as magazines and newspapers, and also a one time charge of KRW 1 billion for IPO legal and other related expenses.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by 231% YoY and by 75% QoQ to KRW 11,663 million in 4Q99, primarily as a result of our additional investments in local fiber optic network as well as in other equipment that are necessary for our expanded services and operations. The amortization of stock options granted to and exercised by Microsoft Corporation on November 22, 1999 amounts to KRW 2,155 million for the 4Q99.
Operating Loss
Operating loss increased by 269% YoY and by 129% QoQ to KRW 20,138 million in 4Q99. Operating loss as a percentage of revenues, however, improved from -106% in 4Q98 to -86 in 4Q99.
Non-Operating Income (Expense)
We reported net non-operating income of KRW 21 million in 4Q99, primarily as a result of interest income and marketable securities valuation gains offset in part by interest expenses.
Net Loss
Net loss increased by 2% to KRW 20,080 million in 4Q99 from KRW 19,748 million in 3Q99 and increased by 516% from KRW 3,262 million in 4Q98. Net loss as a percentage of revenues, however, improved by 12% to -85%.
12 Months 1999 Results : Year-over-Year Comparison
Highlights
-- Revenues increased 657% YoY to KRW 68,202 million primarily due to an
increase in the number of subscribers for broadband Internet and the
number of fiber optic dedicated lines leased.
-- Revenues from Broadband Internet Service increased 2,457% YoY to KRW
19,963 million.
-- Revenues from Data Communications Service increased 486% YoY to KRW
48,238 million.
-- Operating margin improved substantially to -59% in 1999 from -196%
in 1998.
In 1999, Korea Thrunet recorded significant revenue growth of 657% YoY to KRW 68,202 million in light of intensive expansion in its Internet access service business. This was achieved by a combination of extensive network build-out as well as stronger advertising resulting in stronger brand recognition.
Revenues from Broadband Internet Service dramatically increased by 2,457% YoY to KRW 19,963 million in line with the exponential growth of the subscriber base of 1,022% YoY to 134,740 subscribers.
Revenues from Data Communications Service also increased substantially by 486% YoY to KRW48,238 million from KRW8, 226 million in 1998. The increase in our data communications services revenues was due to a substantial increase in the number of lines leased.
Operating Costs
In line with our business expansion, the number of employees and our access line capacity requirement increased substantially. As a result, operating costs increased by 417% YoY to KRW 55,225 million. The increase in operating costs was due mainly to higher network lease payments for our broadband Internet service and data communications service. Network lease payments increased 503% to KRW 31,182 million in 1999 from KRW 5,172 million in 1998. The increase in network lease payments was due primarily to a substantial increase in our utilization of KEPCO's fiber optic and HFC network. Nevertheless, network lease payments for broadband Internet service and data communications service as a percentage of total revenues have decreased to 45% in 1999 from 57% in 1998.
Selling, General and Administrative Expenses (SG&A)
Although SG&A expenses increased by 192% YoY to KRW 25,372 million in 1999. However, the proportion of SG&A to revenues declined to 37% in 1999 in comparison to 96% in 1998. Such increase in SG&A expense includes a 674% YoY increase in advertising to KRW 8,398 million in 1999 in line with the aggressive roll-out of broadband Internet business and listing on the Nasdaq. In addition to the significant increase in advertising, commissions have increased YoY by 435% to KRW 3,276 million, however, KRW 1 billion of which can be attributed to one time IPO legal and related expenses.
Depreciation and Amortization Expense
Depreciation and amortization expense increased 277% YoY to KRW 27,617 million in 1999, primarily due to the additional investments in our local fiber optic network as well as in other equipment that are necessary for our expanded services and operations. The amortization of stock options exercised by Microsoft Corporation on November 22, 1999 amounts to KRW 3,045 million for 1999.
Operating Loss
Operating loss increased 126% from KRW 17,671 million in 1998 to KRW 40,012 million in 1999. Operating loss as a percentage of revenue, however, improved substantially to -59% in 1999 from -196% in 1998.
Non-Operating Income (Expenses)
Korea Thrunet had net non-operating loss of KRW 14,026 million in 1999, primarily reflecting higher interest burden from increased level of debt. Interest expense more than doubled to KRW 22,619 million in light of four domestic bond issuances in total of KRW 126,684 million. As a result, we recorded net interest expense of KRW 14,948 million in 1999 compared to net interest income of KRW 24 million in 1998.
Net Loss
Net loss increased by 619% YoY to KRW 55,576 million in 1999. Net margin, however, improved by 4% to -82% in 1999. We also had net loss per share of KRW 1,002 in 1999.
Company Information
Founded in July, 1996, Korea Thrunet Co., Ltd. is the leading provider of high-speed Internet services in Korea, with 134,740 subscribers as of December 31, 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: 822-3488-8059 Fax: 822-3488-8511 thrunet.com
SOURCE Korea Thrunet Co., Ltd.
-0- 03/13/2000
/CONTACT: In Korea - Thomas Sung, Investor Relations of Korea Thrunet, 822-3488-8059, thomas@corp.thrunet.com; or in the U.S. - Mami Ogawa, Investor Relations of Thomson Financial Investor Relations, 212-701-1824 or mami.ogawa@thomsonir.com, for Korea Thrunet/
/FIRST ADD -- TABULAR INFORMATION -- TO FOLLOW/
/Web site: thrunet.com
Companies or Securities discussed in this article:
Symbol Name
NASDAQ:KOREA |
