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KT Working Through Telecom Soft Patch

By    |   Tuesday, 22 Nov 2011 09:34 AM

South Korean telecommunications company KT Corporation (KT) is battling economic uncertainty these days, working a soft patch to keep demand for its telephone and Internet services strong in a crowded Asian telecom market. Discounts and other reduced billing revenue sent profits falling.

Revenue during the third quarter of fiscal 2011 hit $4.2 billion, a 6 percent drop during the same quarter a year earlier. Net income during quarter came in at $217 million, down 41 percent from the same quarter a year earlier.

"Due to . . . competition, merchandise sales dropped substantially, and seasonality also caused a slight decline in service revenue," the company says in a filing. “Wireless service revenue decreased due to revenue discount tariff plan and interconnection revenue drop, despite a continuous increase of data service revenue."

Stiff competition

Ratings agencies have applauded the company's liquidity and its financial decisions, adding that they like the company's position to tap Internet television services in the South Korean market, which would give KT the chance to bundle its other services.

Other telecoms, however, are looking to do the same.

"Moody's remains cognizant of the sustained period of competitive tension which has come to typify the Korean telecommunications market," Moody's analysts write in a note on the company released earlier in 2011.

That competitive tension could pressure KT and others to speed up investments and other capital expenditures (capex) projects while cutting prices to lure new customers.

"Such competition has resulted in the acceleration of capex and ongoing margin suppression as operators have offered substantial tariff discounts, handset subsidies and other promotions to customers, with obvious adverse consequences on financial metrics," the ratings agency said.

The company will unveil fourth quarter earnings on Feb. 7.

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South Korean telecommunications company KT Corporation (KT) is battling economic uncertainty these days, working a soft patch to keep demand for its telephone and Internet services strong in a crowded Asian telecom market. Discounts and other reduced billing revenue sent...
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2011-34-22
Tuesday, 22 Nov 2011 09:34 AM
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