Telecom Stocks Decline Consecutively Amid Investment Burden and Huawei Issues

[Image source=Yonhap News]

[Asia Economy Reporter Eunmo Koo] The stock prices of domestic mobile telecommunications companies continue to decline daily due to the heavy investment burden required to implement the Digital New Deal policy, compounded by pressure from the United States to halt transactions with Chinese telecommunications equipment maker Huawei.

According to the Korea Exchange on the 27th, SK Telecom's stock price closed at 208,000 KRW on the 24th, down 1.65% (3,500 KRW) from the previous trading day. SK Telecom's stock price has fallen for six consecutive trading days, declining 4.6% since the 16th as foreign investors net sold 92.3 billion KRW. During this period, LG Uplus (-8.1%) and KT (-4.3%) also failed to avoid weakness.

The weakness in telecom stocks is interpreted as reflecting concerns that the large-scale investment plans of mobile telecommunications companies could become a burden on the companies in the future. Stock prices turned bearish after the announcement of telecom companies' investment plans to implement the Digital New Deal policy, a core pillar of the Korean New Deal comprehensive plan. On the 15th, the four telecom companies, including the government and SK Broadband, announced that they would invest approximately 24.5 to 25.7 trillion KRW (tentative) over three years until 2022 in wired and wireless infrastructure to accelerate the early deployment of 5th generation mobile communications (5G).

In the case of LG Uplus, pressure from the U.S. Department of State to stop transactions with Huawei appears to be a burden. On the 22nd, Robert Strayer, Deputy Assistant Secretary of State, urged companies like LG Uplus to "move from unreliable suppliers to reliable ones." However, concerns about pressure to replace Huawei equipment at LG Uplus are considered excessive. Kim Hoejae, a researcher at Daishin Securities, explained, "The U.S. Deputy Assistant Secretary of State mentioned LG Uplus while emphasizing that 'Huawei is an untrustworthy company' in response to a question, but he did not specifically call on LG Uplus to replace Huawei equipment from the outset."

Concerns about the investment burden are also deemed unnecessary, as telecom companies are not recklessly expanding investments solely for the government's Digital New Deal policy. Researcher Kim said, "The investment of about 24 trillion KRW over three years includes backbone networks, LTE, and 5G combined, and is similar to the usual annual investment level of about 8 trillion KRW by the three telecom companies," adding, "There is no reason for telecom companies to be seen as sacrificing for the government."

Researcher Lee Sunhak of Hanwha Investment & Securities analyzed, "Regulatory issues tend to be significantly reflected in the stock prices of domestic telecom industries, but given the recent announcement of the government's Digital New Deal policy and the need to continue 5G investments, the possibility of regulations suppressing the telecom industry is limited."

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