Despite COVID-19... LG Uplus Reports 29.1% Operating Profit Growth Last Year (Update)

[Asia Economy Reporter Joeslgina] LG Uplus recorded an operating profit increase of nearly 30% last year despite the impact of COVID-19. This was the result of balanced growth in both mobile and smart home wired and wireless businesses, as so-called non-face-to-face (untact) services gained attention. This is estimated to be the highest among the three major telecommunications companies, including those that have not yet disclosed their performance.

LG Uplus announced on the 3rd that based on K-IFRS consolidated financial statements, it achieved annual operating revenue (sales) of 13.4176 trillion KRW, service revenue of 10.5906 trillion KRW, and operating profit of 886.2 billion KRW in 2020.

Sales increased by 8.4% compared to the previous year. Subscriber growth due to improvements in wired and wireless services was cited as the background. Service revenue, excluding device revenue from operating revenue, also increased by 15% compared to 2019. Along with revenue growth, efficient marketing cost management continued, resulting in a 29.1% increase in operating profit compared to the previous year.

As of the fourth quarter of last year, operating revenue was 3.5173 trillion KRW and service revenue was 2.7501 trillion KRW, up 10.8% and 16.3% respectively compared to the same period last year. On the other hand, operating profit recorded 175.5 billion KRW, down 3.7% year-on-year, due to a temporary increase in marketing expenses influenced by the launch of the iPhone 12 and net increase in 5G subscribers.

◆ Revenue Increase from MNO and MVNO Subscriber Growth... Strong Performance in Smart Home and Enterprise Sectors

On an annual basis, mobile revenue achieved 5.813 trillion KRW, up 5.4% from the previous year. The increase in MNO subscribers centered on 5G and MVNO subscribers is analyzed to have driven overall wireless revenue growth.

In fact, the total number of wireless subscribers increased to 16.652 million, a 9.2% increase compared to the previous year. In particular, 5G subscribers recorded 2.756 million, an increase of 136.6% compared to 2019.

MVNO saw a significant increase in subscribers as products such as the ‘LTE Large Capacity Plan’ centered on budget phone partners and the ‘Budget Phone Sweet Combination Plan’ combined with unlocked phones received favorable reviews. The cumulative number of subscribers of MVNO operators using LG Uplus’s network was counted at 1.901 million last year.

The ‘Smart Home’ sector, consisting of IPTV and ultra-high-speed internet, earned revenue of 2.0134 trillion KRW, up 9.9% compared to the previous year.

IPTV revenue recorded 1.1452 trillion KRW, up 10.9% year-on-year, thanks to continuous subscriber growth, marking over 1 trillion KRW in revenue for two consecutive years. Differentiation strategies such as segmenting customers by household and strengthening kids’ content are analyzed to have led to subscriber growth. IPTV subscribers reached 4.944 million, up 10.4% compared to the previous year.

The ultra-high-speed internet business also achieved revenue of 868.2 billion KRW, up 8.6% year-on-year, influenced by subscriber growth due to the launch of competitive plans, matching the improvement in smart home performance.

In the enterprise infrastructure sector such as e-Biz, achievements in the IDC business led overall revenue growth. Revenue in the enterprise infrastructure sector in 2020 was 1.359 trillion KRW, up 3.5% year-on-year. Among them, IDC business revenue increased by 16.1% to 227.8 billion KRW compared to the previous year.

Annual marketing expenses recorded 2.3298 trillion KRW, up 3.8% year-on-year, due to increased advertising expenses for securing 5G subscribers and the total amount of public subsidies. However, the proportion of marketing expenses to total service revenue decreased by 0.3 percentage points to 24.1% compared to the previous year. Capital expenditure (CAPEX) was 2.3805 trillion KRW, spent on base station construction to expand 5G coverage.

◆ This Year’s Challenge: ‘Qualitative Growth’... Focus on Securing True Fans

LG Uplus plans to focus on ‘qualitative growth’ this year, prioritizing customer value enhancement. The strategy is to secure so-called ‘true fans’ by strengthening content and improving areas with many customer complaints to increase customer satisfaction.

Ahead of CEO Hwang Hyun-sik’s inauguration, LG Uplus launched mid-priced 5G plans, online-only plans, and bundled discount products this year, signaling the start of efforts to secure true fans. Going forward, LG Uplus plans to continuously consider ways to provide differentiated customer experiences by strengthening online sales channels and improving benefits for long-term customers.

The 5G network will expand coverage mainly in in-building and peripheral areas. While promoting commercialization of SA-based 5G, it also plans to explore business models for 28GHz band services. In the enterprise business sector, it will focus on securing new growth engines centered on smart factories, smart cities, and smart mobility aligned with 5G.

Continuous growth of the smart home business centered on IPTV and IoT will also be pursued. IPTV competitiveness will be enhanced using educational content suited to the untact era, and new services will be developed through collaboration with global operators such as Netflix and Google.

Synergy creation will be accelerated by discovering various convergence services together with its subsidiary LG HelloVision. Plans to maximize synergy through cost reduction and competitiveness enhancement by jointly utilizing resources with LG HelloVision will also be considered.

Lee Hyuk-joo, LG Uplus Chief Financial Officer (CFO, Vice President), said, “This year, we will avoid wasteful acquisition cost competition aiming for customer value innovation and promote qualitative growth through stable investment. We will do our best to enhance corporate value by achieving meaningful results in future growth businesses and management goals.”

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