SK Telecom, South Korea's largest wireless carrier, is planning to make additional investments of up to $100m in Helio, its struggling US wireless joint venture with Earthlink.
The company has been expanding overseas operations in recent years, entering countries such as the US, China, Vietnam and Mongolia, as it struggles to develop revenue sources in the saturated home market where four out of five people carry mobile phones.
But Helio reported a $192m loss last year due to stiff competition in the US wireless market. SK Telecom said earlier this year that losses at the US operations were expected to widen to $330m-$360m this year.
The company said the additional investment will be matched by its US partner Earthlink. Despite heavy losses, Kim Shin-bae, company president, has been enthusiastic about Helio’s growth potential, forecasting the mobile network will turn a profit by the end of next year.
Helio had attracted 70,000 subscribers by the end of last year after its launch in May and Mr Kim expects numbers of US subscribers to nearly treble to 200,000 this year.
Separately, SK Telecom said it will drop a planned acquisition of a 35 per cent stake in Advanced Digital Chips, a local non-memory chip designing company, for Won61.4bn, as its board of directors rejected the plan, which would have made SK Telecom the largest shareholder in Advanced Digital.
SK Telecom shares fell 1.88 per cent to close at Won209,000 on Monday, underperforming a 1.59 per cent rise in the broader market, as investors questioned the company’s growth outlook.
Mr Kim said last month that the company saw a slight increase in marketing costs in the second quarter, which would continue to weigh on earnings. Faced with stalled growth in revenue, the company recently launched new services bundling its mobile service with broadband services provided by local cable operators, in order to attract new customers.