SK Telecom, Rivals Lose Subscribers, Boost Profits
--From AOL.-- Cooters
Seoul, July 5 (Bloomberg) -- SK Telecom Co. and its four South Korean rivals probably piled up profits in June even as they lost subscribers for a second month, analysts said. SK, Korea Telecom Freetel Corp., Shinsegi Telecom Co., LG Telecom Co. and Hansol M.com Co., said they lost 679,000 subscribers in the month. At the same time, though, a government decision to bar companies from selling cheap handsets means they are saving more money. ``We can expect to see subscriber numbers continue to fall for the time being, but that will be more than offset by savings from handset subsidies,'' said Kim Ho Seok, a telecommunications analyst at Samsung Securities. He estimates the five companies will lose 3 million subscribers in the next six months. From January through May, the five companies spent 1.47 trillion won ($1.3 billion) to discount handset prices, a sum close to five times 1999 net income for SK Telecom, the only one of the five to post a profit. With the withdrawal of the subsidies, many Koreans find the phones too expensive. A top-of-the-line mobile phone can cost as much as $500. In another cost-saving move, the companies have cut services to customers who default on bill payments. The three publicly traded companies among the five -- SK Telecom, Freetel and Hansol -- said they will release official first-half earnings in the next two weeks. Switch-a-roo ``The bottom line for these companies for the full year is going to be great,'' said Suh Yong Won, an analyst at Hyundai Securities in Seoul, who forecasts that KT Freetel's full year profit will top 300 billion won. The government outlawed subsidized purchases of mobile phones on June 1 to prevent cellular users from switching service providers so they could buy the latest phone at a discount price. All five of Korea's phone service providers use systems based on code division multiple access technology licensed from Qualcomm Inc. in the U.S. The government decided the rapid turnover in handsets, about two per user every 12 months, was causing an unnecessary outflow of royalty payments. KT Freetel -- which will be merged with Hansol M.com next year after Korea Telecom Corp., Freetel's major shareholder, bought out Hansol -- said it earned about 26 billion won in the first half of this year. Samsung's Kim, who described the first-half figure as ``disappointing,'' forecasts Freetel will earn between 250 billion won and 300 billion won for the year as it saves on handset subsidies. KT Freetel's shareholders should welcome the improved forecasts. So far this year it is the worst performing Korean telecommunication stock and has lost three quarters of its value as investors dumped stocks on the Kosdaq index of over-the-counter shares on which its trades. KT fell 2 percent to 73,200 won today, compared with a 5.3 percent loss by the Kosdaq, which has lost 45 percent this year as investors expressed concern that Internet and telecom-related shares will not earn enough to justify last year's rapid run up. Dominant SK Telecom, the largest service provider, and its new acquisition, Shinsegi, lost the largest number of subscribers in June, shedding about 425,000. The company, which said it doesn't have final figure for June but estimated its numbers at 11.5 million, has to lower its combined market share to less than 50 percent as a condition of government permission for its takeover. Still, June's losses did little to change SK Telecom- Shinsegi's position relative to their competitors. Their combined market share slipped to 57.4 percent from 57.6 percent. ``Its nearly impossible for SK to reduce its market share as long as the subsidy ban remains in place,'' said Hyundai's Suh, who said other service providers followed SK's lead in cutting non- paying customers. SK Telecom shares, which trade on the benchmark Kospi index, rose 1.8 percent to 364,500 won, narrowing their losses to 10.4 percent this year. Hansol's Kosdaq-listed shares fell 4 percent to 20,450 won bringing their losses to 54.76 percent this year. The following is a table of subscriber numbers (in millions, left column) at the end of June and the amount spent on handset subsidies (in billions of won, right column) in the first five months of this year. The figures were provided by each company.
millions/subscribers billions/won
SK Telecom 11.5 510
KT Freetel 4.96 293
Shinsegi 3.75 260
LG Telecom 3.60 250
Hansol 2.70 160
Total 26.51 1473
Jul/05/2000 2:32 ET |
