LG Telecom Ltd., South Korea’s smallest mobile-phone operator, reported its first profit increase in three quarters after reining in marketing expenses ahead of a merger with its fixed-line affiliates.

Fourth-quarter net income rose 52 percent to 61.4 billion won ($52 million) from 40.5 billion won a year earlier, the Seoul-based company said today. Sales increased 2.1 percent to 1.2 trillion won.

LG Telecom began operations as a merged entity this year after combining with LG Dacom Corp. and LG Powercom Corp. to create a company with annual sales of about 8 trillion won. The carrier is seeking to step up competition with SK Telecom Co. and KT Corp. by luring customers to products that bundle high- speed Internet with wireless and fixed-line phone services.

LG Telecom was expected to report profit of 67 billion won on revenue of 1.24 trillion won, according to the median estimate of five analysts surveyed by Bloomberg News.

Operating profit, or sales minus the cost of goods sold and administrative expenses, rose 5.2 percent to 75 billion won, compared with the 83.9 billion won median estimate in the Bloomberg survey.

LG Telecom shares gained 0.9 percent to 8,310 won at 9:45 a.m. in Seoul trading, while the benchmark Kospi stock index climbed 0.6 percent.

Marketing Expenses

LG spent 29 percent of revenue from phone bills on marketing costs, which include expenses for advertising and subsidizing users’ handset payments, the lowest ratio since the first quarter of 2009.

South Korea’s three carriers should refrain from spending too much on promotional expenses, LG Telecom Chief Executive Officer Lee Sang Chul said last month.

LG Telecom has said it expects the combination with its affiliates to help it pare costs, including marketing expenses, by as much as 2 percent of revenue in 2014.

LG Telecom accounted for 18.1 percent of the Korean mobile- phone market at the end of December, compared with SK Telecom’s 50.6 percent and KT’s 31.3 percent, according to the latest government data.

South Korea’s telecommunications industry has undergone consolidation in the past two years as operators attempt to cut costs in a market where more than 90 percent of people already own a mobile phone and nine out of 10 homes have broadband Internet connections. KT, Korea’s largest phone and Internet company, bought out wireless unit KT Freetel Co. last year, while SK Telecom acquired SK Broadband Co. in 2008.

Source:Bloomberg