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=DJ UPDATE:SK Telecom 4Q Net Rises 29%;Growth To Slow In '06
By Yun-Hee Kim Of DOW JONES NEWSWIRES
SEOUL (Dow Jones)--SK Telecom Co. (SKM), South Korea's largest wireless operator by revenue, said Tuesday fourth-quarter net profit rose 29% from a year earlier thanks to strong sales of wireless Internet data services, but forecast earnings growth will slow this year due to stiff competition.
Analysts said that while earnings are expected to continue to grow, a saturated market at home and intense competition among carriers will likely mean growth at a slower pace.
"Even though there will be growth in the bottom line, it's expected to be in the high single-digit range simply because the company isn't expected to see much growth in revenue," said an analyst at a foreign brokerage in Seoul who declined to be named.
SK Telecom's "primary focus this year should be seeking alternative growth avenues such as overseas. Within Korea, they need to diversify out of telecom services and into media," the analyst added.
SK Telecom said net profit for the three months ended Dec. 31 rose 29% to 448.0 billion won ($459 million) from KRW348.1 billion a year earlier, while revenue rose 6% to KRW2.63 trillion from KRW2.48 trillion.
Operating profit jumped 10% to KRW654.8 billion from KRW594.4 billion.
While net profit came in above expectations, revenue fell slightly short of analysts' forecasts. The company was expected to post net profit of KRW415 billion for the quarter, based on the average poll of 12 analysts surveyed by Thomson Financial. A poll of 13 analysts pegged revenue at KRW2.65 trillion.
The company forecasts revenue will rise 3% this year to KRW10.5 trillion from KRW10.16 trillion in 2005, while earnings before interest, taxes, depreciation and amortization is expected to rise 3% to KRW4.40 trillion from KRW4.29 trillion in 2005. For 2005, SK Telecom's net profit rose 25% to KRW1.87 trillion, while revenue rose 5% to KRW10.16 trillion.
This year, SK Telecom stands to see earnings growth slow after making its caller identification service free to subscribers starting from January. The change is expected to wipe out about KRW200 billion in revenue it recognized annually from caller ID fees. Analysts also said marketing expenses may rise if the government approves plans to allow carriers to subsidize certain handset purchases. The plan is up for approval in the National Assembly.
"While earnings will grow this year, it will only be minor due to an expected hike in marketing expenses," said Lee Shi Hoon, an analyst at Hyundai Securities. "The company needs to make cautious efforts to tame marketing expenses."
SK Telecom is betting on new wireless data services to help boost revenue in a market where more than seven out of 10 people carry a cell phone. During the just-ended fourth quarter, SK Telecom said wireless Internet revenue rose 22% to KRW661 billion from KRW544 billion a year earlier due mainly to the offering of new services such as "Mobile Cyworld," which allows subscribers to access their personal Web pages on mobile phones, and an online musical download service called "Melon."
Average revenue per user - a key industry gauge to determine long-term growth - rose to KRW45,046 in the fourth quarter, up from KRW44,336 a year earlier.
SK Telecom had 19.5 million subscribers at the end of December and it is targeting 20 million wireless subscribers this year.
At the end of December, SK Telecom's market share stood at 50.9%, higher than rival KT Freetel Ltd.'s (032390.SE) 32.1% share, and LG Telecom Co.'s (032640.KQ) 17%.
President and Chief Executive Shin Bae Kim said on a conference call Tuesday that the company plans to return 40% of its net profit to shareholders in the form of dividends and share buybacks. It plans to buy back around KRW200 billion in shares this year.
The company also has plans to boost its capital expenditure budget to KRW1.60 trillion from KRW1.47 trillion in 2005, with most of the investment allocated for wireless broadband, or WiBro, and HSDPA, or high speed downlink packet access, which is an enhancement to the third-generation wireless technology WCDMA.

-By Yun-Hee Kim, Dow Jones Newswires; 822-732-2165; [e-mail]
-Edited by J. Timmermans

(END) Dow Jones Newswires
01-23-06 2157ET
Copyright (c) 2006 Dow Jones & Company, Inc.