UPDATE 3-SK Telecom Q2 profit up, Sprint bid talk resurfaces

(Adds forecasts, company comments on bid talk)

By Kim Soyoung and Rhee So-eui

SEOUL, July 26 (Reuters) - SK Telecom Co. (017670.KS), South Korea's top mobile operator, said solid user growth helped it post a modest rise in quarterly profit, and denied a report it was considering a bid for U.S. wireless firm Sprint Nextel (S.N).

A rise in marketing costs as the company chased more profitable users of "third-generation" mobile services like video calls and wireless Internet, weighed on the results and SK forecast its earnings before interest, tax, depreciation and amortisation (EBITDA) will fall from last year's level.

SK is fighting an aggressive marketing campaign by the country's second-biggest carrier, KTF Co. Ltd. 032390.KS, over users for higher-margin services.

SK reported on Thursday a 8 percent rise in quarterly net profit to 403.3 billion won ($441.4 million) -- albeit slightly below a 417.2 billion won forecast from analysts -- as solid subscriber growth and healthy mobile Internet service revenue outstripped the higher marketing costs.

Shares in SK Telecom, with around a $19 billion market value, rose 0.7 percent to end at 217,000 won, beating a 2 percent drop in the wider market .

Earlier on Thursday, a report from online news provider EDaily revived talk that SK may invest in Sprint Nextel Corp.

EDaily quoted SK Vice Chairman Cho Jung-nam as saying the mobile operator was talking to investors that plan to pay the bulk of a takeover bid for the No. 3 U.S. wireless carrier and need someone to manage the phone company.

But SK's chief financial officer Ha Sung-min told Reuters the report was groundless.

"It was one of many proposals we received in the course of business, but we haven't pursued the proposal." Ha also told a conference call with shareholders.

On July 10, SK had denied a report in the Korea Economic Daily, which cited market sources as saying SK had been contacting several funds to finance a takeover of Sprint.

The U.S. company has been the target of takeover speculation since May after smaller rival Alltel Corp. AT.N agreed to a $25 billion buyout.

TAKEOVER SPECULATION

Analysts said the investment talk still makes sense, as SK wouldn't need a majority stake to take control of Sprint Nextel, valued at $62 billion, because Sprint has a fragmented ownership structure that could allow a strategic investor with a minority stake to influence management.

"This is a credible bid. SK would provide Sprint with experience dealing with data services, which could help drive Sprint's growth," said Lee Shi-hoon, an analyst at Hyundai Securities.

SK has been seeking growth outside its home market, where 88 percent of the population have a mobile phone. It runs wireless joint venture Helio with Earthlink Inc. (ELNK.O) in the United States and made a $1 billion investment in China Unicom Ltd.'s (0762.HK) (CHU.N) bonds last year.

SK said it expects this year's EBITDA to be 4 trillion won, down from last year's 4.2 trillion won. It raised this year's revenue forecast slightly to 11.3 trillion won.

"We expect marketing expenses to increase in the second half due to spending linked to growing 3G users," said CFO Ha.

($1=913.6 Won)

(Additional reporting by Kim Yeon-hee and Marie-France Han)