KT Corporation's KTC third-quarter results were better than our estimates, as the company posted surprising growth in sales. However, results for the first nine months of 2009 remain in line with our expectations, and we are maintaining our fair value estimate. Sales increased 4% from the year-ago quarter, versus our negative 1.4% assumption for the year, thanks to a stronger performance in the wireless and fixed-line voice segments. Wireless revenue grew 4.6% from the year-ago period, compared with 1.8% in the second quarter, as stronger uptake for data services helped offset a decline in voice revenue. The firm was also able to expand its subscriber base 3% over the same period. While fixed-line voice services continued to decline, the rate was slower in the quarter at about negative 4.4%, a trend we expect will persist as most customers who want to terminate their fixed-line phones have done so already.At 24%, KT's margin on earnings before interest, taxes, depreciation, and amortization was roughly 4 percentage points lower than a year ago as a result of higher costs of services and marketing expenses. We expect profitability will be pressured through the remainder of the year as competition remains intense. The coming of the iPhone is likely to result in higher selling costs as well, but we expect margins to expand over the long run as carriers refocus on their bottom line.
Get our full take on
KT Corporation
See our complete company report and outlook--including fair value estimate, consider buying and selling prices, risk rating, bull and bear arguments,
and star rating--with a free two-week Morningstar.com Premium Membership trial.
You will also get complete access to all 2,000 Stock Analyst Reports, 2,000 Mutual Fund Analyst Reports, and Morningstar's award-winning Portfolio Management and Screening tools.
Start my free trial
Learn more about Premium Membership
View Sample Analyst Report
More Analyst Research
KT Corporation Full Analyst Report
Analyst Notes
08-10-09 | 3:44PM KT Reports Weak 2Q Results
| 
