Telecom Stocks Gain Momentum in Stock Price Rise After Earnings Confirmation

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[Asia Economy Reporter Eunmo Koo] South Korea's three major mobile carriers are drawing attention to their future stock prices as they deliver solid earnings results, driven by increased wireless business revenue from the rise in 5th generation (5G) mobile subscribers and strong performance in media businesses centered on IPTV.

According to the Korea Exchange on the 18th, SK Telecom's stock price rose 7.5% from June 6, when it announced its Q2 earnings, through the 14th. KT and LG Uplus also recorded returns exceeding the KOSPI's 2.4% increase during the same period, rising 6.3% and 6.0%, respectively, after their earnings announcements on the 7th.

The carriers' solid Q2 performance despite market concerns is seen as the driving force behind the stock price gains. Earlier, all three telecom companies reported double-digit growth in operating profit compared to the same period last year. Kim Hoejae, a researcher at Daishin Securities, explained, "While the impact of COVID-19 led to reduced marketing activities and thus cost savings that improved profits, fundamentally, the increase in wireless revenue from growing 5G subscribers, along with steady demand for value-added services related to IPTV and internet, contributed to the improvement."

The stable earnings trend is expected to continue into the second half of the year. Kim Jangwon, a researcher at IBK Investment & Securities, forecasted, "With the release of new 5G smartphone models in the second half, the subscriber growth rate will expand, and telecom operators' marketing is expected to remain stable. Although marketing expenses may increase due to subscriber growth, the revenue increase will offset this."

Additionally, favorable regulatory environments such as the introduction of laws to prevent Netflix free-riding, the abolition of the rate approval system, and the increasing likelihood of year-end implementation of separate disclosure requirements are positive factors.

There is also analysis suggesting that telecom stocks could enter a long-term upward trend by providing differentiated services distinct from the subscription economy. Oh Taewan, a researcher at Korea Investment & Securities, stated, "In the long term, marketing expenses, which were previously one-time expenditures, will be converted into intangible asset investments for providing differentiated services, and subscription economy models will be introduced. The establishment of subscription economy models in the business-to-consumer (B2C) sector and the development of new 5G business models in the business-to-business (B2B) sector are expected to lead to a revaluation of valuations."

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