UPDATE 2-SK Telecom Q4 net dives as marketing costs jump

(Adds fund manager comments, forecasts, shares)

By Rhee So-eui

SEOUL, Jan 31 (Reuters) - SK Telecom Co (017670.KS), South Korea's top mobile carrier, reported a sharper-than-expected 76 percent drop in quarterly profit as marketing costs and losses at affiliates took their toll, sending its shares down 4 percent.

SK's marketing spend last year was equal to a quarter of its revenue as it battled second-ranked KTF Co Ltd 032390.KS for users for more profitable third-generation mobile services, such as video calls and wireless Internet.

3G-linked investment and marketing spending may fall in the coming quarters, but operators face another cost war as South Korea's new administration is encouraging tariff cuts and competition is set to intensify over packaged services.

"Mobile companies might end up spending as much as last year on marketing," said Lim Eun-mi, a fund manager at CJ Investment Trust Management. "Restrictions on mobile subsidies will be fully lifted this year and there will be pressure to lower rates with the introduction of packaged services."

Analysts say SK could benefit from a broader range of services once it finalises a deal to take control of fixed-line and broadband provider hanarotelecom inc (033630.KQ).

SK, which controls 50.5 percent of the country's mobile market, said it posted October-December net profit of 66.05 billion won ($70 million), well below a forecast of 259.6 billion won from Reuters Estimates.

The earnings shrank from a 279.3 billion won profit a year earlier and 776.8 billion won earned in July-September, when the company booked a one-off gain related to its acquisition of a stake in China Unicom (0762.HK).

Revenue reached 2.92 trillion won, up 6 percent from a year earlier and above a consensus forecast of 2.89 trillion won.

Shares in SK, valued at $18 billion, fell as much as 4.2 percent and were down 2.8 percent at 210,500 won by 0220 GMT, while the wider market was up 1.6 percent.

Last week, KTF saw its fourth-quarter net profit halved to 53.05 billion won, hit by higher marketing costs.

SK had 21.97 million subscribers at end-December, up 8.4 percent from a year earlier -- a strong increase in a country where almost 90 percent of the population has a mobile phone.

But the growth was offset by a 34 percent jump in marketing costs, which totalled 854 billion won in the fourth quarter.

Losses at affiliates such as U.S. wireless joint venture Helio and mobile TV company TU Media also hit its results.

For more earnings details, see the company's Web site at: here esQuarterlyList.jsp Seeking to broaden its product range SK is set to buy a controlling stake in hanarotelecom, the country's No.2 broadband company, for $1.2 billion.

The combination will enable SK to offer packaged services ranging from telephone, mobile and broadband to Internet Protocol TV (IPTV) at lower costs.

SK Telecom is expected to earn 1.62 trillion won in net profit in 2008, versus 1.64 trillion won in 2007, according to Reuters Estimates.

CEO Kim Shin-bae said in a conference call on Thursday the company aimed to increase revenue by 3.6 percent to 11.7 trillion won in 2008, and expected capital investment to decline in coming years.

SK shares rose 18.6 percent in the fourth quarter, bucking a 2.5 percent fall in the KOSPI, boosted by the hanarotelecom deal. ($1=943.5 Won) (Editing by Sei Chong and Ian Geoghegan)