SKT reports first quarterly profit drop in nearly two years

South Korea’s largest mobile operator SK Telecom (SKT) posted net income of KRW299 billion (USD257 million) for the three months to 30 June 2004, down 46% from KRW551 billion a year ago, and the company’s first quarterly drop in profits since 2002. The fall in income was attributed to a falling market share and increased marketing costs. SKT upped its adspend by 47% during the quarter in an attempt to staunch the exodus of subscribers to other suppliers following the introduction of mobile number portability (MNP). The company’s operating profit slumped by 43% to KRW463 billion and sales were largely unchanged at KRW2.4 trillion; both figures fell short of market expectations. Since MNP came into effect in January, SKT’s smaller rivals KT Freetel and LG Telecom have eaten into its market share every month. By the end of June SKT controlled 51.3% of the market – its lowest share since December 2001 – while KT Freetel had 32.96% and LG claimed 15.73%. Critics of MNP in South Korea argue that while it is intended to increase competition, to date it has had a negative impact on profitability for all the country’s wireless operators.