122016 Scripps Network_AFC
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Korea,Telcos

KT: IPTV Scale, DTH Dilemma

Korean telecoms major KT is expected to turn a small profit on its IPTV business this year, seven years after launch.

Management expects KT’s IPTV business to post 20% revenue growth this year, after closing 2015 with more than 6.5 million customers.

The company has grown IPTV revenue at a 22% CAGR over the past five years, acquiring 690,000 new customers in 2015 and targeting 500,000 net additions in 2016, expecting to benefit from a raft of a new UHD channels.

“We’re realizing more higher-quality customers, which is helping drive revenue growth,” says KT’s CFO, Gwang-Seok Shin. “There has also been an improvement in cost efficiency."

Continued market share and pricing battles in Korea's intensely competitive market will not extend the company’s profitability target.

However, KT is closely monitoring the situation with the landmark SKT-CJ Hellovision deal, which is due for approval this year.

“It’s a very interesting attempt to create something – a national player acquiring a platform with great localities,” Shin says. “We will have to come up with ways to deal with it and respond.”

UHD Hopes

Subsidiary KT SkyLife (KTS), which offers DTH services, bundled with IPTV and VOD from KT, continues to face challenges.

Net additions for KTS in 2015 came in at only 48,647, versus 80,000 in 2014 and 390,226 in 2013.

While the company’s pure-play DTH business is growing subs, its IPTV/DTH bundle is not, losing close to 125,000 customers in 2015.

KTS is betting on the continued growth of its UHD services, which launched in June last year and had acquired 110,000 subs by end-2015.

More UHD traction will also help boost Arpu growth. Three new UHD channels are expected to join the KTS platform in 1H 2016.

The company is projecting that its consolidated business rebounds to 100,000 net adds this year and says its single product user base (a-la-carte and other options) is scaling up rapidly.

Meanwhile, KT’s overall media revenues continue to grow, up 10% in 2015 to almost W1.7 trillion (US$1.4 billion), driven by IPTV customer and Arpu growth as well as an ad sales increase from a low base.

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