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South Korea's KT Corp. says likely to cut 5G investments

Earnings decline on rising marketing expenses

  © Reuters

SEOUL -- KT Corp. is likely to cut investments in fifth-generation technology, taking into consideration a wide range of factors from market demand to technical issues, the company's chief financial officer said Wednesday.

Shin Kwang-seok said that the company's level of investments in 5G technology is likely to be lower than that for fourth-generation technology in a conference call after announcing third-quarter earnings.

"The amount of investments in 5G is likely to be cut compared with 4G, though it is hard to forecast it at this moment," said Shin. "We will decide on expansion of [5G] infrastructure by monitoring market demands."

But the company said there was no change in its plan to test its 5G technology at the PyeongChang Winter Olympics in February and launch the services in the market by 2019. KT said that it would demonstrate its 5G capabilities at the Olympics along with Intel of the U.S.

The company reported that revenue for the July-September quarter rose 5.4% to 5.8 trillion won. But operating profit fell 6.1% to 377.3 billion won ($338.7 million) in the July-September period from a year ago, hit by rising marketing expenses. Its net profit also fell to 202.6 billion won, down 13.6%. The telecom company had spent 677.7 billion won of marketing expenses for the three months, up 2% from the previous year.

KT blamed its poor earnings on the government's policy to cut telecom fees, saying that the strategy undermined its autonomy and hurt its revenue. The Moon Jae-in government has pushed telecom players to expand discount rates to 25% from 20% for those on long-term contracts. The government also plans to introduce a so-called universal fee system which forces telecom carriers to offer their services and data at specific prices.

"We expect the government's policy to cut households' telecom expenses will burden our profitability after 2018," said CFO Shin. "The government-led universal fee system will have too much impact on the market, hurting corporate autonomy in deciding prices."

But the company said that its dividend payment will be 1,000 won per share this year, as part of its strategy to increase returns to shareholders. Its dividend ratio will rise above last year's 30%, according to Shin.

KT said that customers of its high speed internet services reached 3.61 million in September, already topping its annual goal of 3.5 million. The company's voice assistant Giga Genie also has been popular in the market, attracting more than 300,000 customers since its launch in January.

Shares of KT were flat at 29,350 won on Wednesday. The benchmark KOSPI rose 1.31% to 2,556.47, hitting a fresh record high on the back of strong earnings led by the largest chip Samsung Electronics.

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