Mobile Carriers Expect Strong Q1 Results from 5G Impact... Investment Pressure Remains

[Asia Economy Reporter Eunmo Koo] South Korea's three major mobile carriers are set to announce their first quarterly earnings of the year this week. Driven by the steady increase in 5G mobile subscribers, the combined operating profit of the three companies is expected to approach 1 trillion KRW, marking an excellent performance. However, network quality issues and the resulting pressure on equipment investment remain ongoing concerns.

According to financial information provider FnGuide on the 10th, the combined operating profit of the three mobile carriers on a consolidated basis for the first quarter of this year is estimated at 970.2 billion KRW, a 7.2% increase compared to the same period last year (904.8 billion KRW). By company, SK Telecom is expected to achieve the largest growth in operating profit with 345.8 billion KRW, up 14.5% year-on-year. During the same period, LG Uplus and KT are projected to post operating profits of 237.5 billion KRW and 386.9 billion KRW, up 8.1% and 1.0%, respectively.

The outstanding performance of the three carriers was primarily driven by the mobile network operator (MNO) business fueled by 5G growth. The number of 5G subscribers in South Korea surpassed 14 million, with the share of 5G subscribers among total mobile subscribers exceeding 20% for the first time. According to the wireless communication service statistics released by the Ministry of Science and ICT, the number of 5G subscribers reached 14.48 million at the end of March, an increase of nearly 820,000 from February (13.66 million). By carrier, SK Telecom accounted for 46.5% of the total with 6.74 million 5G subscribers, followed by KT with 4.4 million (30.4%) and LG Uplus with 3.33 million (23%).

SK Telecom, leading the projections, is expected to see a continuous increase in the proportion of 5G subscribers, resulting in a simultaneous rise in average revenue per user (ARPU) and wireless service revenue. Although a one-time cost of approximately 40 billion KRW was recorded due to additional performance bonuses for employees, excessive marketing competition was absent due to the impact of COVID-19, and the performance of key subsidiaries in media, security, and commerce sectors is also considered favorable.

KT is expected to improve profits as wireless revenue increases with the growth of 5G subscribers. The Yongsan IDC, which opened last year, is also understood to be continuously growing, and the business-to-business (B2B) segment is expected to maintain its growth trend. However, subsidiaries affected by COVID-19, such as BC Card and KT Estate, are expected to continue underperforming. LG Uplus is also projected to maintain a solid profit flow by increasing subscribers not only in 5G but also in wireless, IPTV, and high-speed internet services.

Although 5G subscriber growth has steadily improved earnings, the carriers cannot simply celebrate. Complaints about the current service quality based on the 3.5 GHz frequency band persist, and the delayed deployment of 28 GHz base stations means that issues such as network quality improvement and equipment investment pressure remain unresolved.

The three carriers committed to building and opening a total of 45,000 base stations by this year after being allocated the 28 GHz frequency band in 2018. However, according to industry sources, the number of 28 GHz band base stations installed so far falls far short of the target. The carriers have continuously communicated to the government that investment is difficult due to the lack of optimization of 28 GHz communication equipment and the absence of a market. Recently, Minister Choi Ki-young of the Ministry of Science and ICT expressed the carriers' position on joint construction of 28 GHz base stations, and nominee Minister Lim Hye-sook also stated that incorporating joint construction as a compliance measure could be one of the possible alternatives.

As the government and carriers show signs of easing base station construction requirements, criticism is growing. On the 3rd, Yang Jeong-sook, a member of the National Assembly's Science, Technology, Information and Communications Committee, pointed out, “With more than eight months remaining until the base station construction deadline at the end of this year, it is an unacceptable action for the Ministry of Science and ICT to suggest policy changes from the operators’ perspective, effectively abandoning a national core power.”

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