Telecom Stocks Align with Profit Growth Phase and Benefit from the 'Digital New Deal'

[Asia Economy Reporter Oh Ju-yeon] An analysis has emerged that domestic telecom companies' operating profits have entered an upward phase, and with high dividend attractiveness expected in the second half of the year, future stock price increases are anticipated. Additionally, the government's announcement of the Digital New Deal policy is expected to bring benefits.

On the 17th, NH Investment & Securities predicted that the operating profits of the three major telecom companies this year will increase by double digits compared to the previous year. SK Telecom is expected to record 1.23 trillion KRW, up 10.7% from the same period last year; KT is projected to reach 1.29 trillion KRW, a 11.9% increase; and LG Uplus is expected to see a 25.1% rise to 858.3 billion KRW.

This is because the 5G effect has gradually started to be reflected in wireless revenue, and growth is expected to continue for some time due to the increasing subscriber ratio. Moreover, the media business centered on IPTV is expected to sustain double-digit growth, and the effects of SK Telecom's acquisition of T-broad and LG Uplus's acquisition of LG HelloVision may also be reflected in the performance.

The government's Digital New Deal policy is also a factor raising expectations for stock price increases. In the Digital New Deal policy announced on the 14th, the government revealed plans to expand 5G subscribers to 70% by 2025, based on which 5G is expected to establish itself as a major network service. The Ministry of Science and ICT's approval in June to terminate 2G services also creates a favorable environment for expanding 5G subscribers.

Operating expenses are assessed to have entered a stabilization phase. This is because aggressive marketing has been difficult due to excessive competition and fines last year. Researcher Ahn Jae-min stated, "After the third quarter, the launch of 5G flagship devices (Galaxy Note20, Galaxy Fold2, Galaxy Z Flip 5G, iPhone 12, etc.) will accelerate subscriber recruitment, potentially increasing overall marketing costs. However, considering the already stabilized 5G subscriber market share and the cash flow situation of the three telecom companies, the intense overheating competition seen in the second and third quarters of last year is unlikely to recur." Furthermore, considering the IFRS15 accounting standard changes that have already increased contract acquisition costs, a sharp rise in marketing expenses in the second half is not expected.

Researcher Ahn added, "Domestic telecom companies are expected to enter a mid-to-long-term growth phase from the 2019 performance low point, driven by the 5G effect, growth in the media business, and expansion of B2B business." He expressed hope that "accordingly, corporate values currently at historical low points will gradually recover." He also noted that considering the government's New Deal policy, the will to activate 5G, and reductions in fines, regulations are unlikely to have a significant impact for the time being.

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