Telecom Industry Focused on 탈통신, Why 5G Equipment Investment Dropped by 1.3 Trillion KRW in Its 2nd Year

[Asia Economy Reporter Joeslgina] Last year, the second year since the commercialization of 5G, the domestic telecommunications industry reduced its capital expenditure (CAPEX) by more than 1 trillion KRW. Despite the government directly assigning target figures to telecom companies for the first half of the year to pressure 5G investment amid ongoing 5G quality controversies, the annual results fell short of expectations. The telecom industry is considering a similar or smaller scale of investment this year compared to the previous year.

According to the industry on the 13th, the total CAPEX of SK Telecom including its subsidiary SK Broadband, KT, and LG Uplus in 2020 was 8.2761 trillion KRW, a decrease of 1.3206 trillion KRW (13.76%) compared to the previous year (9.5967 trillion KRW), the first year of 5G commercialization. The first half CAPEX was similar to the first half of the previous year, which was the largest ever on an annual basis despite the impact of COVID-19, but it is understood that the second half was relatively sluggish. Excluding SK Broadband, the total CAPEX of the three telecom companies was 7.4578 trillion KRW, down 1.3277 trillion KRW (15.11%) from a year earlier.

By company, SK Telecom including SK Broadband invested 3.0236 trillion KRW (2.2053 trillion KRW for SK Telecom alone), KT 2.872 trillion KRW, and LG Uplus 2.3805 trillion KRW. Looking into the details, it is clear that investment in wireless networks decreased. When considering only investment in wireless networks, the decrease approaches 30%. The total wireless network CAPEX of the three companies is known to be less than 5 trillion KRW. LG Uplus increased its investment in wired networks by more than 15% compared to the previous year, while reducing wireless network investment by about 28%. KT also cut subscriber network investment by 700 billion KRW.

This is interpreted as a carryover effect compared to the first year of commercialization when large-scale investments were made. In particular, it is evaluated that network investment on the ground was not easy due to the impact of COVID-19. An industry official said, "Each company invested close to 3 trillion KRW for two consecutive years," adding, "Investment scale had to decrease compared to the first year of 5G commercialization, and there was also an aspect of optimizing the operation of existing networks."

Previously, in the cases of 3G and LTE, CAPEX scale clearly decreased from the third year of investment. In addition, the three telecom companies agreed to build a joint 5G network in outlying areas, which is understood to have resulted in cost savings. LG Uplus recently estimated in a conference call that the cost savings from the joint 5G network construction would reach about 1 trillion KRW per company.

However, considering the ongoing 5G quality controversies, criticism seems inevitable over the fact that the investment scale decreased by more than 1 trillion KRW in just the second year of commercialization. The three telecom companies must install 15,000 base stations each in the 28 GHz band by this year, but progress remains sluggish.

Regarding this, the Ministry of Science and ICT, the competent authority, explained, "Telecom companies have reconfirmed that they will steadily proceed with the investment target of 25 trillion KRW from 2020 to 2025," adding, "Since they said they will invest at a level similar to last year on average (this year as well), there will be no disruption to the early establishment of 5G as some worry." Each company recently presented CAPEX guidance for this year at a level similar to or lower than the previous year in their earnings announcements.

A Ministry of Science and ICT official explained, "We will actively encourage such network construction through investment tax credits and quality evaluations, and strive to ensure that the public can actually feel the effects of 5G." Offering a 5G wireless station investment option during the frequency reallocation fee decision process, which ends its allocation period in June, is also part of this effort.

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