[Comprehensive] "Led by 탈통신, 5G Pushed" SKT and LGU+ Operating Profit Grows by Over 20%

[Asia Economy Reporter Seolgina Cho] "?-telecom leads and 5G pushes." Despite the impact of COVID-19 last year, domestic telecom companies such as SK Telecom and LG Uplus recorded operating profit growth in the 20% range. So-called "untact" services gained attention, and new business sectors such as media and security achieved record-high performance, while the core mobile network operator (MNO) segment also showed improved results thanks to the expansion of 5G subscribers.

◆SKT New Business Revenue Hits Record High, MNO Turns to Profit

SK Telecom announced on the 3rd that it recorded consolidated sales of KRW 18.6247 trillion and operating profit of KRW 1.3493 trillion last year. Compared to a year earlier, sales increased by 5% and operating profit by 21.8%. During the same period, net profit rose 74.3% to KRW 1.5005 trillion, influenced by equity method gains from SK Hynix shares.

This performance is analyzed as a result of proactively responding to untact demand and accelerating?-telecom. Considering that operating profit had declined just a year ago due to 5G investment burdens and cutthroat competition, it is evaluated that SK Telecom secured solid results even amid COVID-19. In particular, operating profit from new growth businesses such as media, security, and commerce totaled KRW 326.2 billion, accounting for 24% of total operating profit. This is 10 percentage points higher than a year ago, interpreted as the efforts poured into new businesses being fully reflected in performance.

Among the segments, growth in the media sector within new businesses was remarkable. Subsidiary SK Broadband recorded sales of KRW 3.7135 trillion, up 17.2% year-on-year, influenced by an increase in IPTV subscribers and the merger with T-Broad. Operating profit (KRW 230.9 billion) grew by 59.2%. Commerce business including 11st (KRW 814.2 billion) and security business (KRW 1.3386 trillion) also showed sales growth in the 12% range. SK Telecom has also announced plans for subsidiary IPOs such as One Store starting from the first half of this year.

The core mobile communication segment also succeeded in a turnaround thanks to the expansion of 5G subscribers. SK Telecom's standalone annual sales amounted to KRW 11.7466 trillion, and operating profit was KRW 1.0231 trillion. SK Telecom attracted the largest number of 5G subscribers among the three telecom companies in the second year of commercialization last year. As of the end of last year, the number of 5G subscribers approached 5.48 million, and it is expected to surpass 9 million this year.

Yoon Poong-young, CFO of SK Telecom, said, "All business sectors continued steady growth," adding, "2021 will be a year to accelerate evolution into an AI-based big tech company while challenging the first-ever sales of KRW 20 trillion."

◆LG Uplus Operating Profit Growth Nears 30%

On the same day, LG Uplus's annual results also showed clear growth centered on the media sector. Despite the impact of COVID-19, mobile and smart home wired and wireless businesses grew steadily, and LG Uplus's operating profit growth last year nearly reached 30%. This is estimated to be the highest among the three telecom companies including KT, which has not yet disclosed its results. LG Uplus's sales last year increased 8.4% year-on-year to KRW 13.4176 trillion, and operating profit rose 29.1% to KRW 886.2 billion.

LG Uplus also received excellent results by segment. The surge in demand for high-speed internet and IPTV due to the COVID-19 stay-at-home trend and the successive launches of 5G smartphones including the iPhone 12 played a key role. IPTV subscribers increased to 4.94 million, showing double-digit growth. The number of 5G subscribers also rose 136.6% year-on-year to 2.756 million as of the end of last year.

With a new CEO system about to launch, LG Uplus plans to prioritize enhancing customer value this year and focus on "qualitative growth." The strategy is to strengthen content and improve areas with many customer complaints to secure so-called "true fans" for customer satisfaction.

Such growth led by new businesses including media is expected to be clearly confirmed in KT's upcoming earnings announcement next week. Recently, the three telecom companies have increased the proportion of future new businesses that will become new revenue sources (cash cows) such as media, artificial intelligence (AI), and big data, as the core mobile communication market has practically reached saturation.

With domestic 5G subscribers approaching 12 million, profitability in the core mobile communication business is also clearly improving. However, the nationwide 5G network construction, which requires large-scale funding, is not yet complete, and competition over mid- to low-priced 5G plans is expected to intensify this year, so cost burdens remain.

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