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KT feels effects of job cuts

3 Nov 2003

South Korea’s dominant fixed line telco KT Corp on Friday reported a loss of KRW497 billion for the three months to the end of September 2003, on the back of heavy redundancy payouts and the first fall in quarterly sales since the company’s inauguration in 1981. Announcement of the net loss, which was well ahead of the KRW320 billion level forecast by analysts, came a month after KT Corp shed 5,500 jobs, around an eighth of its total workforce, in response to fierce competition in South Korea’s increasingly saturated internet market. Overall sales fell by 0.3% to KRW2.79 trillion in the three month period as the operator took a one-off hit of KRW825 billion in relation to the severance packages. KT has forecast full year sales to remain flat at around KRW11.7 trillion, with net profits for the twelve months expected to come in at KRW1.1 trillion, compared to last year’s KRW1.96 trillion. KT’s shares have fallen by 3% to KRW47,100 so far this year, whilst the market as a whole has risen by 20%.

KT controls around 90% of South Korea’s local fixed line call market as well as half of the international direct dial (IDD) sector and almost a third of the wireless sector via its subsidiary KT Freetel. Sales from traditional telephone revenues fell by 5% to KRW1.15 trillion in the third quarter, whilst revenues from land-to-mobile call termination operations decreased by almost 7% to KRW514 billion. KT has responded to the falling fixed line margins by investing heavily in the internet sector, where it had 5.52 million broadband customers at the end of September, up from 4.56 million twelve months previously and equal to 48.8% of the Korean broadband market. KT’s sales from internet operations reached KRW607 billion, a 21.6% rise on the corresponding period of 2002, but only KRW10 billion higher than the second quarter of 2003. KT faces competition in the broadband sector mainly from Hanaro Telecom and Korea Thrunet.

South Korea
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