The Three Major Telecom Companies Overcome the 'Corona Boritgogae' with Untact Boom

Expected Strong Operating Profit for 4Q of Top 3 Telecoms
Double-Digit Growth Forecast for Full-Year Results
3 Million KRW 5G Price Competition Next Year Poses 'Dark Horse' Challenge

[Asia Economy Reporter Koo Chae-eun] The three major mobile carriers?SK Telecom, KT, and LG Uplus?are expected to post solid results in the fourth quarter despite the resurgence of COVID-19. Although consumer sentiment was dampened by the COVID-19 downturn, the establishment of an 'untact culture' led to a surge in both wired and wireless data usage. Additionally, strong sales of the iPhone 12, which incurred relatively low marketing costs, helped 5G subscribers surpass 10 million, contributing to favorable performance factors. However, with the launch of 5G plans priced in the 30,000 KRW range starting with SK Telecom, competition on pricing is intensifying, raising concerns that average revenue per user (ARPU) growth may slow from next year.

Strong Operating Profit Performance by the Three Companies

According to FnGuide on the 31st, the combined estimated operating profit for SK Telecom, KT, and LG Uplus in the fourth quarter (based on estimates from three or more securities firms) is projected at 683.1 billion KRW. Annual operating profits are expected to increase compared to a year ago, with SK Telecom at 1.2812 trillion KRW, KT at 1.2224 trillion KRW, and LG Uplus at 917.1 billion KRW, representing growth rates of 15.5%, 6.19%, and 33.66%, respectively.

Looking at each carrier, SK Telecom's fourth-quarter revenue is expected to grow 15.5% year-on-year to 4.692 trillion KRW, with operating profit forecasted at 261.3 billion KRW?an 'earnings surprise'?up 60.79% from the previous year. The performance growth was driven by 'cash cow' subsidiaries such as SK Broadband, ADT Caps, 11st, and One Store, while maintaining a stable market share ratio of '5 to 3 to 2.' The increase in 5G ARPU is also seen as contributing to improved results.

KT's fourth-quarter revenue is expected to decline slightly by 0.1% year-on-year to 6.189 trillion KRW, but operating profit is estimated to rise 38.19% to 204.9 billion KRW. The increase in home data usage amid the rise in remote work has been a boon for KT's wired business division. As of October, KT's high-speed internet subscribers numbered 22.37 million, up 2.6% from the previous year. Although key affiliates such as BC Card and Estate have slowed, strong performance in Giga Wi-Fi and B2B businesses offset these declines.

LG Uplus's fourth-quarter revenue is projected to increase 8.5% to 3.4439 trillion KRW, with operating profit expected to rise 13.64% to 206.9 billion KRW. The IPTV business revenue of industry leader LG HelloVision is now fully reflected in the results, and the strong sales of unlocked phones have led to an increase in MVNO operators, contributing to solid performance.

Price Competition and 28 GHz Investment Pose Performance Challenges

The main factor behind the strong fourth-quarter results of the three carriers was the success of the iPhone 12 series, which began sales in October. Due to high demand for unlocked iPhone 12 models, carriers were able to attract high-ARPU 5G subscribers without engaging in costly marketing battles. According to the Ministry of Science and ICT, the number of 5G subscribers reached 9.984 million by the end of October and is estimated to have effectively surpassed 10 million as of December.

The increase in mobile data demand also appears to have positively impacted telecom revenues. According to Kim Sang-hee, a member of the Democratic Party, the expected domestic traffic volume by the end of this year is 7,431,342 TB (terabytes), the highest ever recorded. The rise in demand for higher-priced plans with greater data usage, driven by increased consumption of media content such as IPTV, also positively influenced performance.

The challenge begins next year. Cost issues are expected to intensify with the commercialization of the 28 GHz band and the launch of mid- to low-priced plans. According to the Ministry of Science and ICT's telecom quality evaluation, the average 5G download speed of the three carriers is 690.47 Mbps, only about 4.5 times faster than LTE, falling far short of the initially anticipated '20 times faster than LTE.' This is because nationwide 5G networks have not yet been fully established, and the ultra-high frequency 28 GHz band has not been commercialized. From next year, investment pressure on 28 GHz infrastructure will increase, making cost outflows inevitable.

The launch of mid- to low-priced online 5G plans is also a key issue. Starting with SK Telecom's 30,000 KRW range 5G plan, if KT and LG Uplus join the low-price plan launch, 5G ARPU may decline, continuously burdening performance. A telecom industry insider said, "The 28 GHz band is a high-frequency band with a short radio wave reach, making network construction much more challenging and capital-intensive, which could significantly impact next year's performance."

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