LG Home Shopping sees profit jump 748%

LG Home Shopping, Korea's largest cable TV home shopping network, expects to double its subscriber base by the end of this year and boost revenue to $540 million from $285 million in 1999, following new government regulations allowing the company to broadcast to more homes.

á

The Seoul-based company, which has 60% of Korea's TV home shopping market, predicts its net profit will triple to $30 million in 2000 from $9.2 million in 1999. In 2001 net profit will rise 87% to $56 million and in 2002 will rise 39% to $78 million, the company predicts. It forecasts revenue will jump to $1.1 billion in 2002, boosted by an increase in subscribers toáeight million fromátwo million in 1999.

á

Korea's home shopping market is growing faster than anywhere in the world, which has helped five-year-old LG Home become the world's third largest cable TV shopping company after QVC and Home Shopping Network of the US. Yet its growth is founded on a much smaller consumer base than that of its US counterparts. HSN generates some $1 billion selling goods to about 70 million homes. LG Home expects to generate the same amount from just 8 million homes.

á

"Our marketing strategy is different," says Yung Jae Choi, the company's chief executive. "We target medium to high income people whose average purchase is more than $100, compared to an average of $30 in the US."

á

The company's strategy emerged partly by default. When it began operations in 1995, most Koreans couldn't afford cable TV. Those that could were by definition relatively wealthy. Today Korea is emerging stronger than most Asian economies from the recession sparked by the 1997 currency crisis, and consumer spending is expected to rise. According to Eric Fishwick, North Asia economist at Credit Lyonnais Securities Asia, domestic demand will remain firm in 2000 and 2001, supported by strong real wage growth. He expects gross domestic product to rise 7.3% this year.

á

That bodes well for LG Home, an affiliate of the LG Group, Korea's third largest company. LG Home's shares have risen 46% since the company first listed on the Kosdaq in January to KRW90,000 ($79.96) on May 18. The company has just one domestic competitor: 39Shopping, which originally had 60% market share and now has just 40%.

á

LG Home's programming, broadcast on channel 45, reaches some 16% of homes with cable TV. A new broadcasting law due to take effect in the second half of this year means private systems operators will have to make all private programming, including home shopping channels, available to the country's six million private systems operator subscribers. The company expects that to boost its subscriber base to four million by the end of the year.

á

LG Home's biggest shareholders are LG Group founders Ku Hur and the Hur family, which hold 42%.