KT Chalks Out 2010 Target - Analyst Blog

South Korea’s incumbent fixed-line carrier KT Corp. (KT) has outlined its guidance for 2010. The carrier expects revenues to increase 2.8% in 2010 to KRW19.5 trillion (US$17.3 billion) from the estimated KRW18.96 trillion (US$16.8 billion) in 2009. KT is expected to release fourth-quarter 2009 results on Jan 29, 2010.

KT plans to boost capital expenditure by 8% to KRW3.2 trillion (US$2.8 billion) in 2010. The company will spend more in 2010 to expand its fiber-to-the-home network coverage to 99%, establishing mobile broadband Internet (WiBRO) networks in 84 cities and adding 14,000 more wireless access points to address rising wireless data demand.

Following its merger with wireless subsidiary KT Freetel in June 2009, KT has become a full-service provider controlling approximately 90% and 31% of the South Korean fixed-line and wireless market. However, KT continues to experience declines in its legacy wireline business due to intense competition. The company is battling for market share with its archrival SK Telecom (SKM), South Korea’s largest wireless carrier, in the highly matured domestic market. KT forecasts the declining trend in fixed-line business to continue in 2010.

To counter competition and boost profit, KT is currently seeking new avenues of growth and streamlining its business structure. KT hopes to achieve its 2010 sales target by cutting costs and boosting IPTV (Internet TV) and WiBRO offerings. The company announced a major workforce restructuring in December 2009 to eliminate 5,992 jobs through an early retirement program, equating to 16% of its workforce.

KT is banking heavily on wireless data services (especially smartphones) to fuel revenue growth in 2010. The company is marketing Apple’s (AAPL) iPhone in South Korea which is driving data usage. KT aims at boosting profit from data services by expanding its smartphone range in 2010 which will cover more than 20% of its total handset offerings. Half of the company’s smartphones will run on Google’s (GOOG) Android platform. However, competition will intensify in the smartphone market as SK Telecom is expanding its handset line-up to take on iPhone.

KT expects dividend for 2009 to meet market expectation despite the hefty one-time cost for severance pay associated with the voluntary retirement program. The company expects to incur KRW860 million (US$765 million) in early retirement payout which will drag its fourth-quarter 2009 results. Excluding early retirement payments, KT forecasts an operating profit of KRW1.82 trillion (US$1.6 billion) and a net profit of KRW1.26 trillion (US$1.1 billion) for 2009. KT will finalize the dividend payment for 2009 in a board meeting in late January 2010.