LGU+ Aims for 30% 5G Subscriber Share...1.2 Trillion Wireless Equipment Investment (Comprehensive)

LG Uplus Q4 Earnings Announcement
30% Expansion Target for 5G Subscribers at 11% Level
Wireless Facility Investment of 1.25 Trillion Expected This Year Including 5G
Open to OTTs Beyond Netflix

[Asia Economy Reporter Han Jinju] LG Uplus aims to increase its 5G subscriber base to 4.5 million, which is 30% of its wireless subscribers, and invest more than 1.2 trillion KRW in 5G infrastructure this year.

On the 7th, during LG Uplus's 2019 Q4 earnings conference call, CFO Lee Hyuk-joo stated, "The expected 5G phone lineup for 2020 will include more than 20 models, including the iPhone," and added, "We expect the proportion of 5G wireless subscribers to exceed 30% of the total subscribers by the end of the year."

Last year, when 5G was commercialized, the number of subscribers was 1.165 million, accounting for 11% of the total wireless subscribers (15.256 million). LG Uplus plans to increase the 5G subscriber ratio to 30% to offset losses caused by investment costs.

The CFO explained, "Improving 5G profitability is a truly difficult challenge," adding, "We need about 4.5 to 5 million 5G subscribers to reach break-even. The annual fixed cost for 5G is estimated to be around 1 trillion KRW, and 5G-related revenue must exceed 2 trillion KRW to cover common costs and realize profits."

He further stated, "Due to ongoing 5G investment depreciation and marketing burdens last year, we are pursuing profit maximization through service differentiation and marketing innovation, aiming to improve operating profit through structural innovation in sales methods. We need to consider various factors such as the emergence of services that can accelerate 5G adoption and device distribution to determine the timing for improving wireless business profitability."

Considering the increase in 5G subscribers, LG Uplus plans to execute facility investments worth 2.5 trillion KRW this year, slightly lower than last year's 2.6085 trillion KRW. This year, they will accelerate in-building cell construction and SA-based 5G commercialization to improve call quality. As of the end of last year, LG Uplus had established 5G base stations in 85 regions.

The CFO said, "We must invest at a level where both expected and current subscribers can receive service anywhere in peripheral areas. We expect that about half of the capital expenditure (CAPEX) will be allocated to wireless. The other half will be for backend and network wired reinforcement and continuous expansion investments in existing businesses, aside from 5G-related infrastructure investment."

To improve the performance of LG HelloVision, acquired last year, LG Uplus plans to actively utilize its infrastructure to expand synergy. The CFO explained, "There was a long period from the acquisition decision to approval, during which we prepared many tasks as part of post-merger integration (PMI). We can generate synergy exceeding the acquisition cost of LG HelloVision."

He added, "HelloVision has been at the center of M&A activity for the past 2-3 years and lacked services or products beyond traditional cable TV, with weak infrastructure. We will integrate Uplus's market-recognized services into HelloVision and use or reinforce Uplus's infrastructure to create synergy."

LG Uplus 2019 Service Revenue, Operating Profit

LG Uplus has an exclusive service contract with Netflix and provides services, but it remains open to collaboration with other OTT service providers. As of last year, IPTV subscribers increased by 458,000 (11.4%) year-on-year to 4.477 million.

Consumer Business Group Head Choi Chang-guk said, "We have provided differentiated services to customers through an exclusive contract with Netflix, and based on this exclusive service, we plan to approach emerging OTT platforms with an open mindset from a business strategy perspective."

On the same day, LG Uplus announced that its consolidated operating profit for Q4 2019 was 182.2 billion KRW, a 68.8% increase compared to the same period last year. Revenue for the same period was 3.1742 trillion KRW, up 3.0%, and net profit was 103.3 billion KRW, up 37.3%.

For the full year 2019, consolidated operating profit was 686.2 billion KRW, down 7.4% year-on-year. Revenue for 2019 was 12.382 trillion KRW, up 5.6% from the previous year, while net profit was 438.8 billion KRW, down 8.9%.

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