KOREA Q-2 financials, released after bell. A real pile to wade-through, I haven't digested it yet. Looks like revenues way up, but losses too.
(NOTE: The PR below seems to stick to Korean-currency figures. Here's the link to the actual balance-sheets, which were released as an "add-on" PR and include conversions to US dollars: biz.yahoo.com
Vagabond
========================
Thursday August 31, 4:29 pm Eastern Time
Korea Thrunet Announces 2nd Quarter Results For the Period Ended June 30, 2000
SEOUL, South Korea and NEW YORK, Aug. 31 /PRNewswire/ -- Korea Thrunet Co., Ltd. (Nasdaq: KOREA - news; ``Korea Thrunet''), Korea's major broadband Internet-access services provider and one of the leading data communications providers, today announced the results of its operations for the quarter ending June 30, 2000. All 2Q00 figures were reviewed and 2Q99 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
-- 2Q Financial Results: Year-over-Year and Quarter-over-Quarter
Comparison
The statements included above and elsewhere in this news 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.
Business Outlook
Korea Thrunet further accelerated growth in its broadband Internet subscriber base during the second quarter of 2000. As of June 30, 2000, Korea Thrunet recorded 411,964 paying end-users, adding 180,950 net paying end-users over the course of 2Q00 and averaging 60,316 new monthly users versus 32,091 in 1Q00.
Between May and July, Korea Thrunet discontinued all promotional subsidies such as discounts on subscription and installation fees in line with its strategy of ``Managed Growth'', enhancing average revenue per unit (ARPU) while still growing its subscriber base substantially. Successfully implementing the strategy in its business, Korea Thrunet was able to substantially increase the monthly average subscriber net adds in 2Q00 in spite of discontinuing subsidies. As Korea Thrunet phased out its promotional subsidies between May and July, its residential ARPU increased to KRW 28,400 in July. In addition, the Company continued to record 59,028 new subscribers in July totaling 470,992.
Korea Thrunet's data communications services displayed steady growth in 2Q00, recording revenue growth of 79% from 2Q99. The number of dedicated lines leased increased by 133% to 7,594 lines in 2Q00 from 3,260 lines in 2Q99. The strong increase in revenues and in the number of dedicated lines leased primarily reflects an increase in the number of mobile telecom subscribers and more extensive value-added mobile communications services, due to larger bandwidth requirements by mobile telecom service providers. Once the Korean government completes its scheduled selection of 3G technology or IMT-2000 (International Mobile Telecommunications 2000) service providers in October, the data communications services market in Korea should experience a further acceleration in growth. 3G or IMT-2000 is the technology standard that allows mobile users access to a wide range of services provided by fixed and wireless telecommunications networks. Korea Thrunet, which has the most extensive fiber optic network in Korea after Korea Telecom, is well-positioned to benefit from these expected business developments.
In addition to broadband Internet access and data communications services, Korea Thrunet is a leading provider of broadband portal services, a rapidly growing additional revenue stream of the Company. From March 31 to July 31, 2000, the Company's registered user base increased by 123% to 2.0 million. Daily pageviews increased 54% to 2.0 million pageviews during the same period. Korea Thrunet currently offers users the most extensive array of multimedia broadband content, and is ahead of the competition in terms of broadband content revenues generated.
Revenues from paid content such as games and movies increased 194% to KRW 570 million in 2Q00 from KRW 194 million in 1Q00. Entering 3Q00, Korea Thrunet recorded revenues from paying content of KRW 365 million in July. The Company expects the growth in revenues from paying content to continue going forward. Beginning in April 2000, Korea Thrunet started generating a significant amount of revenues from online advertisements, which increased to KRW 247 million during 2Q00 from KRW 22 million in 1Q00. With the launch of its mega portal, ``Korea.com'', Korea Thrunet expects to accelerate its portal revenue growth by adding e-commerce revenues from 4Q00 in addition to revenues from paying content and online advertisements.
Korea Thrunet recorded a net loss of KRW 59.9 billion in 2Q00, including depreciation and amortization expenses of KRW 22.8 billion. Increased depreciation and amortization expenses reflect a significant investment in network assets by the Company during the first six months of 2000. Capital expenditure in 1H00 amounted to more than KRW 539 billion, which represents over two-thirds of total expected capital expenditure at the beginning of the year.
When measured as a percentage of revenues, Korea Thrunet's operating loss declined to 98% in 2Q00 from 105% in 1Q00. The Company expects this downward trend in loss ratio to continue for the rest of this fiscal year.
Although short-term debt increased in 2Q00, Korea Thrunet noted that it reduced that amount by over 40% as of the end of August via rollover into long-term debt and divestment of certain investments. Since June, the Company has also divested itself of all or a portion of its stakes in several investments. During July, Korea Thrunet signed a six-year loan agreement for a KRW 200 billion facility granted by Korea Development Bank (KDB) and privately placed KRW 100 billion of convertible bonds with KDB. Proceeds from the borrowings will be used generally to grow and strengthen the Company's broadband Internet access and data communications business.
In addition to formulating a strategy to maximize its revenue per subscriber, Korea Thrunet is also focused on efforts to lower its costs. In April, Korea Thrunet leased dark fiber from SK Telecom for a long-distance backbone rather than renting bandwidth as a usage base from Powercomm. This action helped to reduce the network rental fee in respect of data communications services, the Company's largest operating cost item, as a percentage of total revenues, from 30% in 1Q00 to 21% in 2Q00. Korea Thrunet has also deployed its own HFC (Hybrid Fiber Coaxial) network covering approximately 3.2 million Korean homes in the first half of 2000. The Company expects that capital expenditures for additional HFC networking in the future should be very minimal and the network rental fee as a percentage of total revenues should continue to decline as new subscribers will be taken up on its own HFC network.
As of July 31, 2000, Korea Thrunet provided broadband Internet services in 56 out of 77 System Operator (SO) areas passing 6.5 million homes. As of March 31, 2000, the Company offered services to 50 SO areas passing 6.2 million homes. During the second quarter, the number of homes passed by Korea Thrunet's own HFC network increased to 3.2 million from 2.9 million on March 31, representing approximately 50% of the Company's total homes passed. With the growth of the Company's network, both its dependency on Powercomm and operating costs such as network rental fees to Powercomm and commissions to SOs will decline. In fact, the ratio of paying end-users from Korea Thrunet's own network to its total paying end-users increased substantially from 9% in 1Q00 to 25% in July.
Korea Thrunet signed a final contract with Cisco Systems Capital Corp. (Cisco), a subsidiary of Cisco Systems, for US$115 million of vendor financing on August 14, 2000. The contract demonstrated a mutual commitment by both companies to solidify the strategic relationship formed in February 2000 to co-develop the next generation IP (Internet Protocol) infrastructure, integrating data communications as well as broadband Internet access services via cable modem in Korea. To further strengthen its strategic business position, the Company is in the process of completing a vendor financing arrangement with another of its major vendors.
Underscoring the Company's efforts to seek global content partners for the launch of its mega portal, ``Korea.com'', Korea Thrunet formed strategic alliances with two major Asian broadband and multimedia content/access players. On June 14, 2000, Korea Thrunet signed a Memorandum of Understanding (MOU) with Infocomm Development Authority of Singapore (IDA) to develop a co-branded Internet site and to share localized content which will enhance its broadband and multimedia content. And on May 2, 2000, Korea Thrunet and GigaMedia, a leading broadband Internet access services and content provider in Taiwan, also entered into a strategic alliance for content sharing and mutual development of technology in Asia.
Operating Highlights
Strong Subscriber Growth
Despite discontinuing most promotional subsidies such as free one-month subscription service and installation fees for new subscribers in the latter part of 2Q00, Korea Thrunet displayed another strong quarter of growth in its broadband Internet subscriber base during the period. The number of paying end-users for broadband Internet services increased to 411,964 in 2Q00, up 594% from 59,347 in 2Q99 and 78% from 231,014 in 1Q00. Korea Thrunet nearly doubled monthly average net adds of its paying end-users from approximately 32,000 in 1Q00 to 60,000 in 2Q00.
Significant Recovery in ARPU
ARPU for Korea Thrunet's broadband Internet services decreased sharply between the latter part of 1Q00 and the first part of 2Q00, mainly due to the heavy promotions of discounted subscription fees during 4Q99 and 1Q00 and a related lag in their impact on revenues of approximately two months. However, after Korea Thrunet shifted its overall company strategy to managed growth and eliminated all promotional subsidies, ARPU increased significantly during the latter part of 2Q00. As Korea Thrunet phased out its promotional subsidies between May and July, its residential ARPU increased to KRW 28,400 in July.
Diversification of Revenue Sources
Given the competitive dynamics in the Korean broadband Internet access market, Korea Thrunet has diversified its revenue sources. Korea Thrunet has been increasing revenues from paid content and online advertisements. Revenues from paid content and online advertisements increased 277% to KRW 815 million in 2Q00 from KRW 216 million in 1Q00, and these revenues comprised 3.3% and 1.9% out of total broadband Internet revenues in 2Q00 and 1Q00, respectively.
Network and Service Coverage Expansion
During 2Q00, Korea Thrunet increased total number of homes passed to 6.5 million and the number of SO areas where it provides broadband Internet services to 56. Comparable 1Q00 figures were 6.2 million homes passed and 50 SO areas. Korea Thrunet is now ready to serve 45% of total households in Korea. At the end of 2Q00, 78% of Korea Thrunet's total paying end-user base was located in areas covered by Powercomm's or SOs' HFC network and 22% was in its own HFC network areas.
Strategic Alliance with Singapore Infocomm Development Authority
On June 14, 2000, Korea Thrunet signed a Memorandum of Understanding (MOU) with Infocomm Development Authority (IDA) of Singapore to develop a co-branded Internet site and to share localized content which will enhance its broadband and multimedia content. Both companies agreed to test their selected and localized broadband content for the next three to six months and to share content-related revenues. For Korea Thrunet, Singapore is the most ideal place to test its content services before exploring global opportunities due to its diverse languages and people with multi-cultural backgrounds.
Strategic Alliance with GigaMedia
Korea Thrunet and GigaMedia, a leading broadband Internet access service and content provider in Taiwan, entered into a strategic alliance expected to enable both companies to pursue new joint broadband content creation and distribution opportunities. The two companies agreed to share and localize each other's selective content, which might further develop into realizing potential operational improvements via technology sharing and content co-licensing.
2Q00 Financial Results: Year-over-Year and Quarter-over-Quarter Comparison
Highlights
-- Total revenues increased 225% YoY and 58% QoQ to KRW 50.4 billion.
-- Revenues from Broadband Internet Service increased 557% YoY and 117%
QoQ to KRW 25.3 billion.
-- Revenues from Data Communications Service increased 79% YoY and 18% QoQ
to KRW 20.8 billion.
-- Total paying end-users for Broadband Internet Services increased 594%
YoY and 78% QoQ to 411,964.
-- Revenues for Broadband Internet Services surpassed revenues for Data
Communications Services for the first time.
-- In addition to 5 SOs that were acquired at the end of 1999 and
consolidated in 1Q00 financial results, 2 SOs and "e-link Co., Ltd.", a
B2C entity that was acquired at the beginning of 2000, were
consolidated in 2Q00 results.
Revenues
Aggregated 2Q00 revenues totaled KRW 50.4 billion, 225% greater than KRW 15.5 billion in 2Q99 and 58% greater than KRW 32.0 billion in 1Q00. Increased Company revenues are primarily due to the strong growth in revenues from broadband Internet services.
Revenues for Broadband Internet Services in 2Q00 increased to KRW 25.3 billion, up 557% from KRW 3.8 billion in 2Q99 and up 117% from KRW 11.6 billion in 1Q00, reflecting the tremendous growth in the Company's broadband Internet service subscriber base, which increased by 594% YoY and 78% QoQ to 411,964. In addition, the increase in broadband Internet revenues largely reflected Korea Thrunet's industry-leading decision to discontinue promotional subsidies that otherwise would have weighed down the revenue realization and profitability of the business. Revenues from content offerings and online advertisements also showed strong growth during 2Q00. Revenues from paid content such as on-demand games and movies increased 194% to KRW 570 million in 2Q00 from KRW 194 million in 1Q00. Korea Thrunet also recorded KRW 247 million of online advertisement revenue in 2Q00. Revenues from these paid content and online advertisements comprised 3.3% and 1.9% of total broadband Internet revenues in 2Q00 and 1Q00, respectively.
Revenues from Data Communications Services for 2Q00 increased to KRW 20.8 billion, up 79% YoY and up 18% QoQ, reflecting steady, yet healthy growth in the corporate customer base. The number of dedicated lines leased increased to 7,594 lines in 2Q00, up 133% from 3,260 in 2Q99 and up 24% from 6,133 in 1Q00.
In addition to five SOs acquired at the end of 1999 and consolidated in 1Q00 results, two SOs and one B2C company called e-link Co., Ltd., acquired at the beginning of 2000, were consolidated in 2Q00 financial results. Revenues from Cable Television Services provided by these SOs increased by 58% QoQ to KRW 4.3 billion, reflecting an increase in the number of SOs to be consolidated and steady growth in Korean cable TV industry which led to an increase in revenues for cable TV subscription fees and advertisements. E-link had no revenues in 2Q00. Inter-company transactions were excluded for consolidation purposes.
Operating Costs
Operating costs in 2Q00 totaled KRW 56.6 billion, up 358% YoY and 59% QoQ. In data communications services, network and ancillary facilities rental costs were the biggest cost items, increasing 11% QoQ to KRW 10.8 billion in 2Q00. Higher costs were mainly due to an escalation in renting electric poles for constructing our local fiber optic network and our HFC network. However, this QoQ trend in network and ancillary facilities rental costs slowed significantly towards the later part of 2Q00, mainly because Korea Thrunet started leasing dark fiber for long-distance backbone from SK Telecom instead of leasing bandwidth from Powercomm and because incremental costs for renting electric poles used in constructing its own HFC network became very minimal, reflecting the fact that the Company's own HFC network build-out is almost complete. Accordingly, network and ancillary facilities rental costs as a percentage of total revenues decreased to 21% in 2Q00 from 30% in 1Q00. Nonetheless, installation expenses and commissions in broadband Internet services in 2Q00 increased 84% QoQ to KRW 27.8 billion from KRW 15.1 billion in 1Q00, reflecting a surge in new subscribers. Operating costs in total as a percentage of total revenues remained flat at 112% in 2Q00 versus 111% in 1Q00.
Selling, General and Administrative Expense
Selling, general and administrative (SG&A) expenses increased to KRW 20.4 billion in 2Q00, up 56% QoQ. Advertising expenses, representing 29% of total SG&A expenses, grew 15% QoQ to KRW 5.9 billion as the Company deployed aggressive marketing promotions for TV commercials and newspaper advertisements. In addition, fees and charges increased 182% QoQ to KRW 3.1 billion in 2Q00 from KRW 1.1 billion due to various consulting work for the mega portal, Korea.com, and legal commissions for funding projects.
Depreciation and Amortization Expense
Depreciation and amortization expense increased 363% YoY and 35% QoQ to KRW 22.8 billion in 2Q00, mainly due to additional investments in Korea Thrunet's own local fiber optic and HFC networks, as well as equipment for network and other areas that were necessary for expanded services and operations.
Operating Loss
The Company's operating loss increased 47% QoQ to KRW 49.3 billion in 2Q00. Depreciation and amortization expense represented 23% of the total operating and SG&A costs. EBITDA margin was at the same level of previous quarter at -52.7%. However, operating loss as a percentage of total revenues (operating margin) improved at 98% in 2Q00 from 105% in 1Q00.
Non-Operating Income/Loss
Korea Thrunet recorded a net non-operating loss of KRW 10.6 billion in 2Q00. Interest expense increased 97% YoY and 52% QoQ to KRW 11.7 billion, and equity in loss of affiliates increased 31% QoQ to KRW 2.5 billion in 2Q00 from KRW 1.9 billion in 1Q00.
Net Loss
While the net loss increased to KRW 59.9 billion in 2Q00 from KRW 38.5 billion in 1Q00, up 56% QoQ, net loss as a percentage of total revenue remained consistent at 119% in 2Q00 versus 120% in 1Q00. Basic and diluted loss per share was KRW 832 in 2Q00 compared to KRW 169 in 2Q99 and KRW 535 in 1Q00.
Company Information
Founded in July, 1996, Korea Thrunet Co., Ltd is a major provider of broadband Internet access services and a major data communications services provider in Korea. Korea Thrunet acquired the domain name ``Korea.com'' in March 2000, and is developing it into an innovative and versatile Internet platform to meet the communication, community, content and commerce needs of Korean Internet users. The first to offer broadband Internet services in Korea, with 470,992 paying end users at July 31, 2000, Korea Thrunet currently passes over 6.5 million homes. Thrunet service features ``always-on'' Internet access at speeds up to 100 times faster than traditional dial-up Internet access, with compelling multimedia content such as on-demand movies and music videos, Internet telephony, unified messaging services as well as multimedia bulletin board and chatting services. On the data communication side, Korea Thrunet services more than 210 customers, with major Korean telecommunications companies such as SK Telecom and Shinsegi Telecomm accounting for a substantial majority of data communications revenues.
Corporate Headquarters:
Korea Thrunet's principal offices are located at 1337-20, Seocho-2 dong, Seocho-ku, Seoul, Korea 137-751.
Phone: 822-3488-8059 Fax: 822-3488-8511 thrunet.com
SOURCE: Korea Thrunet Co., Ltd. |
