LG Uplus Reports 7.4% Decrease in Operating Profit Last Year Amid 5G Cutthroat Competition (Update)

[Asia Economy Reporter Seulgina Jo] In the inaugural year of 5G commercialization last year, LG Uplus's operating profit decreased by 7.4%. This was due to the burden of large-scale 5G investments and a surge in marketing expenses caused by cutthroat competition to attract customers. However, among the three major mobile carriers including SK Telecom and KT, LG Uplus recorded the smallest decline in operating profit.

LG Uplus announced on the 7th that its operating revenue (sales) in 2019 reached 12.382 trillion KRW, service revenue was 9.2056 trillion KRW, and operating profit was 686.2 billion KRW. Operating revenue and service revenue (combined wireless and wired revenue excluding device revenue from operating revenue) increased by 5.6% and 2.9% respectively compared to the previous year. Operating profit decreased by 7.4%.

Among service revenues, wireless revenue grew by 1.4% year-on-year to 5.5168 trillion KRW. With continuous net subscriber growth including 5G, total subscribers increased by 1.128 million (8%) compared to the same period last year, surpassing 15.256 million. As of the end of December last year, 5G held about 25% market share (1.164 million subscribers), leading changes in the entrenched 5:3:2 market structure. The company cited innovative services and industry-first tariff plans as the background for this change.

MVNO subscribers increased by 42.1% year-on-year to 1.091 million. The company was the first in the industry to offer six types of roaming plans including unlimited data and fixed-term plans, provided 150GB of large-capacity LTE data monthly, and launched the financial industry's first budget phone in partnership with KB Kookmin Bank.

Wired revenue reached 4.0289 trillion KRW, up 4.5% from 3.8551 trillion KRW the previous year. Among this, smart home revenue, which combines IPTV, ultra-high-speed internet, and internet phone revenue, increased by 10.9% year-on-year to 2.0462 trillion KRW. IPTV revenue exceeded 1 trillion KRW for the first time, recording 1.0323 trillion KRW, a 16.6% increase from the previous year. Ultra-high-speed internet revenue rose 9% to 813.5 billion KRW. IPTV subscribers totaled 4.477 million, up 11.4% year-on-year.

Corporate revenue recorded 1.9827 trillion KRW, a 1.3% decrease from the previous year. Growth in the IDC business, driven by domestic and global large customer contracts, minimized the impact of declines in e-Biz such as electronic payments, dedicated lines, and telephone sales. Corporate revenue refers to combined revenue from e-Biz including electronic payments and corporate messaging, IDC, dedicated lines, and telephone services.

Annual marketing expenses increased by 8.7% year-on-year to 2.246 trillion KRW due to increased advertising and promotional expenses and total public subsidies following the commercialization of 5G services. However, in the fourth quarter, subscriber acquisition cost per person decreased by 0.5% compared to the previous quarter. Capital expenditure (CAPEX) amounted to 2.6085 trillion KRW due to network investments including the full-scale construction of 5G base stations, an 86.7% increase from the previous year.

LG Uplus plans to drive customer experience innovation across all business areas through digital transformation (DX) in 2020. It aims to discover future growth engines in both B2C and B2B businesses with 5G. By launching 5G 3.0 services, it will lead service competition in the B2C market and expand business opportunities in B2B sectors such as smart factories, remote control, connected cars, smart schools, and drones.

The 5G network plans to improve call quality through full-scale in-building cell construction and accelerate preparations for standalone (SA)-based 5G commercialization.

Continuous growth in smart home businesses such as IPTV and AIoT will also be maintained. IPTV competitiveness will be further strengthened through differentiated content like ‘Idolnara’ and ‘Bravo Life.’ The introduction of a new AIoT platform will improve user convenience by enabling seamless connection between home and mobile. Additionally, synergy creation will be accelerated by discovering various convergence services together with LG HelloVision, which was acquired last year.

Lee Hyuk-joo, LG Uplus Chief Financial Officer (CFO, Vice President), said, “We have expanded the customer value of 5G services into daily life areas and focused our capabilities on service improvement by promoting cooperation with leading domestic and international operators.” He added, “This year, we will avoid wasteful acquisition cost competition and pursue service differentiation through customer experience innovation and profitability-centered management across all businesses.”

This content was produced with the assistance of AI translation services.