SK Telecom Followed by KT and LG Uplus Showing Positive Earnings Signals (Comprehensive)

Strong Q2 Performance of Three Major Telecom Companies
Impact of Non-Face-to-Face and Untact Demand Due to COVID-19 Spread
Cost Issues in Second Half but Smartphone Launches Also Anticipated

[Asia Economy Reporter Koo Chae-eun] KT and LG Uplus each recorded solid earnings growth in the second quarter, with operating profits rising by 18% and 59%, respectively. The explosive increase in traffic demand due to the spread of COVID-19, along with growth in media segment sales such as IPTV and the acquisition of 5G subscribers, drove growth in their core mobile network operator (MNO) businesses. As a result, the three major telecom companies showed an average growth rate of around 39% in the second quarter despite the adverse business conditions caused by COVID-19.

According to industry sources on the 7th, following SK Telecom's announcement the previous day, KT and LG Uplus released their second-quarter earnings on the same day. KT reported consolidated sales of KRW 5.8765 trillion and operating profit of KRW 341.8 billion, with sales down 3.6% year-on-year but operating profit up 18.6%. SK Telecom, which was the first among the three telecom companies to disclose results the day before, posted sales of KRW 4.6028 trillion and operating profit of KRW 359.5 billion, representing year-on-year growth of 3.7% and 11.4%, respectively.

For KT, growth was driven by an influx of 5G subscribers, increased ARPU (average revenue per user), reduced marketing expenses, and improved earnings in the B2B segment. The sharp decline in roaming revenue and poor performance of real estate and financial subsidiaries were offset by controlled marketing costs and growth in B2B businesses such as artificial intelligence (AI) and digital transformation (DX). With more people staying indoors due to COVID-19, IPTV bundled subscribers also increased. KT’s subsidiary KT Skylife was selected as the preferred bidder for the acquisition of Hyundai HCN, and a partnership with Netflix has also begun, suggesting that growth in the media and platform segments will accelerate further. KT CEO Koo Hyun-mo recently emphasized in an email to employees that "We must transform from a telecom operator to a 'platform operator based on telecommunications' to continue growing and developing."

LG Uplus also posted an 'earnings surprise' exceeding expectations, thanks to balanced subscriber growth across mobile, media, and MVNO (mobile virtual network operator) sectors. LG Uplus recorded mobile service revenue of KRW 1.3475 trillion, up 4.9%, and its MVNO business saw cumulative subscribers grow 37.1% due to synergy effects with LG HelloVision. IPTV and high-speed internet also grew steadily, with smart home revenue increasing 10.4% year-on-year to KRW 494.6 billion.

Expectations and concerns coexist regarding the second half earnings of the three telecom companies. Massive investment costs are anticipated due to nationwide 5G network construction, fines for violations of device distribution structure improvement laws, and frequency reallocation. The three telecom companies have committed to investing between KRW 24.5 trillion and KRW 25.7 trillion in 5G deployment by 2022 under the government’s Digital New Deal policy. However, growth factors that could offset these costs exist, as new 5G smartphones such as the Galaxy Note20, Galaxy Fold2, and iPhone 12 are lined up for release in the second half. As of May, the number of 5G subscribers in Korea was approximately 6.87 million, and it is estimated to have surpassed 7 million currently. The three telecom companies have set a target of attracting 10 million subscribers by the end of the year.

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