KT Corp., South Korea’s No. 1 telecom service provider, on Friday reported a 14.3% drop in second-quarter operating profit despite steady revenue on the back of pay raise and bonus payment.
In collective wage bargaining in July, it agreed to a 3.5% rise in basic salary and pay an one-off bonus of 3 million won ($2,200) to each employee. Last year, it raised basis pays by 3%.
Its consolidated operating profit came in at 494.0 billion won ($363 million) in the quarter ending in June, down 14.3% on-year. Net profit decreased 5.1% on-year to 410.5 billion won.
In the quarter, it booked 64.4 billion won as expenses for the pay increase, including those not paid during their barganing period.
The remaining 53.6 billion won of expenses related to the pay raise will be reflected in third and fourth quarters of this year, KT’s Chief Financial Officer Jang Minx said on an earnings conference call on Friday.
Excluding the lump sum payments, its operating profit slipped 3.1% in the second quarter, broadly in line with market expectations of a 4% decline.
In 2023, it reflected the annual pay increase in the third quarter in lump sum.
Revenue stood at 6.55 trillion won in the second quarter, staying at its highest revenue for a second quarter since 2010.
By division, revenue of internet services edged up 1% on-year thanks to the rise in internet protocol TV subscriber number.
KT’s headquarters in Seoul
KT is transforming into a business-to-business service company as its mainstay telecom services have been on the decline.
Last month, it carried out an organizational reshuffle to reinforce its business-to-business (B2B) services with a focus on media and artificial intelligence.
In June, it formed a strategic alliance with Microsoft Corp. to jointly develop AI, cloud and IT services tailored for the Korean market.
Cloud, data center and property service units shored up KT’s earnings in the second quarter. KT Cloud Co. and KT Estate Co. saw revenue up 27.1% and 7.1%, respectively.
By contrast, its content platforms such as Studio Genie, payment processing company BC Card and Skylife TV Co., South Korea’s only satellite broadcaster, suffered single- to double-digit falls in revenue.
As part of business restructuring, KT has sold a stake in digital logistics service platform KT Rolllab and withdrawn from Vietnam’s healthcare market, while wrapping up block chain service.
By Ju-Hyun Lee
2juhyun@hankyung.com
Yeonhee Kim edited this article
