Possible 3-G delay for SK Telecom

SK Telecom unveiled its 3-G phone models after it won a license for the service

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By staff and wire reports

SEOUL, South Korea -- South Korea’s top mobile phone carrier, SK Telecom, says it may have to delay the launch of its 3-G (third generation) services.

The carrier planned to begin 3-G mobile services in May next year, but Song Hyo-sup, SK’s vice president of investor relations, said although the company was “trying” to meet that schedule, it may not make it.

”It [a delay] may be possible but the company has not decided officially at this time,” he told CNN.

If SK Telecom does delay its 3-G service, it will follow Japan mobile carrier giant NTT DoCoMo who announced last month it will postpone the commercial launch of its 3-G cellular services until October.

NTT DoCoMo said that the delay was to ensure its complex network will function properly.

Song's comments are the strongest indication to date that SK Telecom may delay its 3-G service.

There has been some recent speculation on the issue following earlier reports that the company would not launch 3G services until 2003.

The Financial Times in March reported Tae Jin Park, a manager at SK Telecom, as telling a Credit Suisse First Boston conference the group planned to recoup its costs on the existing second generation and so-called 2.5G technology before fully adopting 3G services.

SK Telecom is the biggest wireless telecommunication services provider in South Korea. Formerly known as Korea Mobile Telecom, it boasts more than 11 million cellular users, or 44 percent of the market.

Mobile phones and other wireless devices such as personal digital assistants equipped with 3G technology allow users to surf the Internet at high speeds.

Net-profit doubles

Song’s statement on the possible delay comes on the same day SK Telecom released its first quarter results, showing net-profits more than doubled from a year earlier.

Profits were boosted by reduced marketing costs and a government ban on subsiding handset prices.

First quarter net-profit rose 104 percent to a record 400 billion won ($304.2 million) from 196 billion won in the first quarter of 2000. Expectations were of a first quarter net-profit of 320 billion won.

“It beat market expectations,” said Yang-Jong-in at Tongyang Securities. “But marketing expenses would rise again in the second half, slowing its earnings growth for the entire year.”

According to Multex Global Estimates, SK Telecom’s net profit for the whole year is expected to come in at 1.14 trillion won against 950.66 billion won in 2000.

”Its profitability has improved due to a decline in costs, resulting from the subsidy ban and lower advertising fees for new subscribers," said Stan Jung at LG Investment and Securities.

Sales up

SK said first-quarter marketing costs were cut 74 percent to 144 billion won from a year earlier.

The government banned handset price subsidies after they pushed most mobile carriers into the red in 2000, in June last year.

Sales for the first three months of the year were 1.42 trillion won, up from 1.40 trillion won a year ago.

The mobile carrier's earnings before interest and taxation rose 102 percent to 625 billion won, while its operating expenses declined 27 percent to 797.1 billion won.

SK said its marketing costs also declined because of the government’s move to restrict its market share.

Expansion into Asia

After taking a majority stake in the unlisted Shinsegi Telecom, a rival operator, last year, Song told CNN that SK was now aiming to expand its services in the region.

“We are looking at various opportunities in South Korea and also China, Mongolia and Vietnam,” he said.

The government allowed SK to take the majority stake on condition their combined market share fell below 50 percent by end-June 2001. At the end of April, their market share was 52.2 percent.

After June, the combined market share can expand again.

SK Telecom shares finished up 0.4 percent at 234,500 won following the release of the results.

But the stock is down 7.3 percent since the start of the year, under-performing the benchmark KOSPI index which has risen 16.05 percent during the same period.

The KOSPI closed up 0.21 percent on Friday.

Reuters contributed to this report.

3G reprieve for Japan handset makers
April 25, 2001
DoCoMo plunges on report of 3G delay
April 23, 2001
Wait for 3G wireless not over, say analysts
March 2, 2001

SK Telecom
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