'5G First Year' KT Reports 8.8% Decrease in Operating Profit Last Year...Maintains 1 Trillion Won Club (Update)

[Asia Economy Reporter Joselgina] KT announced on the 6th that it recorded sales of KRW 24.342 trillion and operating profit of KRW 1.151 trillion in 2019, the first year of 5G commercialization (consolidated basis). Sales increased by 3.8% year-on-year due to growth in wired and wireless communication business including 5G and media business, but operating profit decreased by 8.8%.

This is interpreted as a result of increased costs such as investment in 5G networks and marketing. Last year, KT's capital expenditure (CAPEX) for building 5G networks increased by 65% year-on-year to KRW 3.2568 trillion. However, the decline in operating profit narrowed from double digits in 2018, when the adverse event of the Ahyeon exchange building fire occurred, to single digits.

This performance was anticipated early on. The three major telecom companies including KT engaged in a self-destructive competition by offering public subsidies of around KRW 700,000 immediately after 5G commercialization in April last year. As a result, operating profit in Q2 last year fell by more than 23% compared to the previous quarter. Although the subsidy competition eased afterward, the impact of the cutthroat competition negatively affected marketing costs in Q4.

By segment, wireless business sales recorded KRW 6.9707 trillion, up 0.2% year-on-year. Among them, wireless service sales (KRW 6.5663 trillion) turned around thanks to the increase in 5G subscribers. The total number of wireless subscribers was 21.92 million, with a net increase of 800,000 annually. The number of 5G subscribers reached 1.42 million, accounting for about 10% of all postpaid mobile phone subscribers. This figure is slightly below KT's expectation of 1.5 million.

In Q4, wireless ARPU (average revenue per user) decreased by 0.3% year-on-year and 1.8% quarter-on-quarter due to a change in accounting standards that deducts membership point usage from revenue. Calculated by the previous method, Q4 ARPU grew by 2.1% year-on-year and 0.6% quarter-on-quarter due to the expansion of 5G subscribers.

Wired business sales decreased by 1.0% year-on-year to KRW 4.6971 trillion. A KT official said, "The number of Giga Internet subscribers, the main internet product, grew to 61% of total high-speed internet subscribers, offsetting the decline in wired telephone sales." High-speed internet sales (KRW 2.0157 trillion) continued to increase for five consecutive years.

Media and content business sales increased by 13.5% to KRW 2.74 trillion. Olleh TV, the No. 1 paid broadcasting service in Korea, expanded its subscribers to 8.35 million. On a separate basis, IPTV sales increased by 15.4%, maintaining double-digit growth. In the content sector, group companies' sales such as Genie Music and KTH's T-commerce also expanded. Meanwhile, financial business sales decreased by 1% to KRW 3.4118 trillion due to BC Card's domestic merchant fee reduction, and other service sales remained similar to the previous year at KRW 2.4267 trillion.

A KT official explained, "Overall sales increased due to the expansion of 5G subscribers, and we joined the 1 trillion won operating profit club for five consecutive years. Internet and media sales also surpassed the 2 trillion won mark each, maintaining steady growth." As of February, the number of KT's 5G base station equipment exceeded 71,000 units based on activated stations. This year, KT aims to expand indoor coverage mainly in major buildings nationwide and introduce 5G standalone mode (SA).

Meanwhile, KT's Q4 sales recorded KRW 6.1955 trillion, up 3.4% year-on-year. Operating profit during the same period was KRW 148.2 billion, up 54.8%. However, this reflects the impact of the Ahyeon exchange building fire in Q4 last year. Compared to the previous quarter, it decreased by 52.5%. Q4 net profit turned to a deficit.

This content was produced with the assistance of AI translation services.