5G Boosted Telecom ARPU... Only LG Uplus Shows Declining Trend

[Asia Economy Reporter Joselgina] In the second year since commercialization, 5G has created a divide in the performance of the mobile telecommunications industry. Expectations that the higher 5G tariffs compared to LTE would raise the Average Revenue Per User (ARPU) have varied among telecom companies. While SK Telecom and KT saw an increase in ARPU, LG Uplus experienced a decline alone.

◆ SKT and KT ↑, LG Uplus ↓= According to industry sources on the 2nd, SK Telecom's wireless ARPU in the fourth quarter of last year was 31,738 KRW, up 1.8% from the previous quarter and 1.3% from the same period last year. This figure excludes the impact of membership points due to accounting standard changes and marks the fourth consecutive quarter of growth since the first quarter of last year. KT also recorded 32,111 KRW, an increase of 0.6% quarter-on-quarter and 2.1% year-on-year. This shows a clear trend of performance improvement before and after the commercialization of 5G last year.

Just a few years ago, the ARPU of the three major telecom companies, which exceeded 35,000 KRW, had recently declined. Growth stagnated due to market saturation, and fierce tariff competition among the three companies, including selective discount plans and unlimited plans, dealt a direct blow to profitability. However, with the commercialization of 5G and the increase in subscribers to high-priced 5G plans, ARPU is being driven up. Last year, the number of 5G subscribers for the three telecom companies was 2.08 million for SK Telecom, 1.42 million for KT, and 1.164 million for LG Uplus.

However, despite this increase in 5G subscribers, LG Uplus alone recorded a decline. LG Uplus's fourth-quarter ARPU was 31,139 KRW, down 0.2% from the previous quarter. Compared to a year ago, the decrease was 1.3%. On an annual basis, it fell 4.0% to 31,143 KRW. An industry insider explained, "It is surprising that ARPU decreased despite the increase in 5G subscribers," adding, "In the case of LG Uplus, unlike competitors, the effects of excessive tariff discounts seem to be continuing."

◆ Steady growth of around 5% expected this year= The telecom industry expects that as 5G subscribers expand significantly this year, ARPU will also grow by around 5% (mid-single digits). Additionally, with the mass release of 5G-based devices such as the Galaxy S20 series launching today, it is anticipated that this will boost the influx of 5G subscribers.

Jang Minjun, a researcher at Kiwoom Securities, said, "With the full-scale release of 5G devices, performance growth will continue based on subscriber growth," and added, "As 5G subscriber inflow is progressing rapidly, a rebound in ARPU is expected, which could also lead to a stock price turnaround."

Among the three companies last year, SK Telecom, which attracted the most 5G subscribers, aims to reach 6 to 7 million subscribers by the end of this year. KT also plans to raise the proportion of 5G subscribers to 25-30% of its total subscribers, which is about 4.5 million. LG Uplus has also set a target of 4.5 to 5 million subscribers.

However, the bleeding competition that may occur during the subscriber acquisition process is considered a key factor for performance improvement. Last year, the marketing expenses of the three telecom companies exceeded 8 trillion KRW in total. In the case of LG Uplus, the proportion of 5G and LTE subscribers is 96.2%, which is higher than competitors and is pointed out as an obstacle to future ARPU improvement. SK Telecom and KT have lower levels at around 84%.

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