Telecom Stocks Stretch Ahead of 2Q Earnings Announcement

Early Next Month SKT, KT, LGU+ Earnings Announcements
All Expected to Exceed Market Forecasts
LG U+ Projected to Increase Operating Profit by Over 50% Year-on-Year
"5G Impact to Drive Upward Trend in Second Half Earnings"

The three major mobile carriers

[Asia Economy Reporter Minwoo Lee] Telecommunications company stocks, which had been unable to avoid a downward trend earlier this month, are now rebounding. This is interpreted as being driven by expectations that second-quarter earnings this year will exceed forecasts, as well as optimism that the full-scale launch of 5G services will lead to a long-term increase in earnings starting in the second half of the year.

According to the Korea Exchange on the 29th, as of 11:20 a.m., SK Telecom's stock price rose 1.17% from the previous day to 216,500 KRW. This marks a 4.1% increase compared to 208,000 KRW on the 27th. After hitting 228,000 KRW at the beginning of the month, the month-long downward trend began to reverse. LG Uplus and KT showed similar trends. LG Uplus recorded 12,500 KRW at the start of the month but dropped about 10% to 11,300 KRW on the 24th. It then rebounded for two consecutive days, rising about 4% to 11,750 KRW as of 11:20 a.m. on the same day.

Expectations grew as second-quarter earnings, to be announced on the 6th for SK Telecom and the 7th for KT and LG Uplus, are forecasted to exceed expectations. Market consensus for the second-quarter earnings of the three telecom companies is generally positive. SK Telecom is expected to achieve sales of 4.5828 trillion KRW and an operating profit of 328.3 billion KRW, representing increases of 3.3% and 1.7% respectively compared to the same period last year. LG Uplus is anticipated to deliver a 'earnings surprise' with sales estimated at 3.3692 trillion KRW, up 5.3% from the second quarter of last year, and operating profit projected to rise 42.7% to 212 billion KRW. KT, which is somewhat lagging, is expected to see sales decrease by 0.8% to 6.051 trillion KRW, but operating profit is forecasted to increase by 16.7% to 336.7 billion KRW.

5G is cited as the background for the strong performance. Despite no strategic device launches and a modest net increase in 5G subscribers, average revenue per user (ARPU) is expected to steadily rise. Hongshik Kim, a researcher at Hana Financial Investment, analyzed, "Especially after the COVID-19 pandemic, the trend of LTE subscribers moving to low-cost plans has weakened, while the proportion of subscribers on unlimited data plans for both 5G and LTE has likely increased."

The outlook for the second half of the year is also bright. The three telecom companies are expected to enter a phase of significant earnings improvement. This is because the increase in mobile phone sales revenue is expected to accelerate while the growth rate of marketing expenses and depreciation costs is expected to slow. Researcher Kim predicted, "The effect of increased mobile phone sales revenue due to the rise in 5G subscribers will become more pronounced from the third quarter, and considering the application of IFRS 15 accounting standards, the impact of conservative marketing efforts since the end of last year is likely to result in marketing expenses stabilizing from the second half of this year."

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