[Concall] LG Uplus Joins Digital New Deal with 30% Operating Profit Growth (Comprehensive)

LG Uplus, Operating Profit Up 30% Year-on-Year Amid COVID-19 Challenges
Service Revenue Reaches 10 Trillion Won
Continuing to Develop AI Technology This Year
Exploring Smart New Business Opportunities

[Asia Economy Reporter Minyoung Cha] LG Uplus recorded an operating profit increase of nearly 30% last year despite the adverse effects of COVID-19, thanks to its efforts to strengthen non-face-to-face (untact) services. This year, with changes in the telecommunications industry based on digital devices anticipated, the company aims not only to maintain its cash cow in the business-to-consumer (B2C) sector but also to secure competitiveness in business-to-business (B2B) areas such as smart factories and connected cars.

Last Year, MVNO and Service Revenue Surpassed 10 Trillion Won

LG Uplus announced on the 3rd that it achieved consolidated operating revenue (sales) of 13.4176 trillion won, service revenue of 10.5906 trillion won, and operating profit of 886.2 billion won in 2020.

Annual 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.

By business division, mobile revenue reached 5.813 trillion won, up 5.4% from the previous year. The increase in subscribers for the 5G-centered mobile network operator (MNO) business and the mobile virtual network operator (MVNO, commonly known as 'alttael phone') business led to overall wireless revenue growth. In particular, MVNO saw a rapid increase in subscribers due to favorable reception of LTE large-capacity plans centered on alttael phone partners and alttael phone honey combination plans combined with unlocked phones.

The smart home division, consisting of IPTV and high-speed internet, earned revenue of 2.0134 trillion won, up 9.9% from the previous year. Revenue from the corporate infrastructure sector, including e-Biz, was 1.359 trillion won, a 3.5% increase from the previous year. Annual marketing expenses increased by 3.8% year-on-year to 2.3298 trillion won due to increased advertising and promotional expenses for securing 5G subscribers and the total amount of public subsidies.

In the single quarter of the fourth quarter, operating revenue was 3.5173 trillion won, and service revenue was 2.7501 trillion won, up 10.8% and 16.3%, respectively, compared to the same period last year. On the other hand, operating profit was limited to 175.5 billion won, down 3.7%, due to increased marketing costs influenced by the launch of the iPhone 12 and net increase in 5G subscribers.

Continuing This Year with AI-Based Smart Technologies

Furthermore, as demand for smart homes, connected cars, and artificial intelligence (AI) continues to grow this year, LG Uplus plans to focus on securing big data analysis and convergence technologies based on AI. Previously, LG Electronics launched an AI research institute together with its core affiliates in electronics and chemicals.

In the B2C business sector, the company plans to accelerate attracting 5G phone subscribers along with mid-to-low-priced bundled services such as alttael phones. The 5G penetration rate is expected to reach 40% by the end of this year. Accordingly, it is forecasted that the 5G business will reach the breakeven point with 5 million subscribers secured by the second half of next year. This is based on a comprehensive calculation considering average revenue per user (ARPU), contribution margin, and investment costs. It is expected that 4 million subscribers can be secured by the end of this year.

In the B2B sector, amid competition in 5G technology and the Korean version of the Digital New Deal policy, LG Uplus will actively seek business opportunities in the public sector. The company plans to find opportunities not only in existing networks but also in new business areas such as smart factories and smart mobility by utilizing solutions. Expectations for the mobility sector, including connected cars and autonomous driving innovation projects, have also increased. Regarding the connected car business, it was also suggested that annual demand for new cars will increase by 1.8 million due to mandatory installation of in-vehicle communication systems.

LG Uplus Chief Financial Officer (CFO) Vice President Hyukjoo Lee stated, "From the customer service perspective, we will work on improving pain points such as rates," adding, "We will strengthen bundled services such as honey combination plan discounts and direct services, while also enhancing convenience by expanding consumer contact points such as kiosks, large marts, and convenience stores."

He also emphasized corporate social responsibility and shareholder return policies. CFO Lee said, "We will continue telecommunications services and donation sharing while expanding digital social contributions in education and security," and added, "We will work with consumers in the COVID-19 environment through donation plans for alttael phones." The company also positively considers efforts to enhance stock prices through share buybacks.

However, regarding the possibility of a partnership with the global online video service (OTT) Disney Plus, which is the biggest topic in this year's content strategy, the company remained cautious. Expectations are high as LG Uplus enhanced IPTV competitiveness last year through an exclusive contract with Netflix. Director Choi Changguk of the Media Content Business Group said, "The company is pursuing an open platform strategy related to OTT," and added, "Discussions are ongoing regarding cooperation with Disney, but nothing has been finalized yet."

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