[Concall Summary] LG Uplus Hwang Hyun-sik's 'True Fan Strategy' Pays Off... Quarterly Record Operating Profit

Q1 Operating Profit Hits 275.6 Billion Won
Record Quarterly Performance
Driven by Wireless Business and IPTV... B2B Also Strong
'U+ Together' and Mid-Low Priced 5G Plans
Customer-Customized Strategy Through Plan Differentiation

Hwang Hyun-sik, CEO of LG Uplus

[Asia Economy Reporter Cha Min-young] Hwang Hyun-sik, CEO of LG Uplus, has turned his dedication to 'true fans' into the highest-ever quarterly performance in Q1. The quarterly operating profit reached 275.6 billion KRW, marking the best quarterly result in history. Korea's first acquaintance bundling plan and mid-priced 5G plans brought a win-win effect of subscriber growth and reduced churn rates. However, despite the rare strong performance in the market, some pointed out the need for "a more proactive shareholder return policy" due to lower dividend expectations compared to competitors.

Dual Growth in Wireless Business and IPTV... B2B and New Businesses Also Strong

LG Uplus announced on the 12th that its consolidated operating profit for Q1 was 275.6 billion KRW, a 25.4% increase compared to the same period last year. During the same period, sales (operating revenue) and service revenue increased by 4.0% and 4.7% year-on-year, reaching 3.4168 trillion KRW and 2.6919 trillion KRW, respectively. Service revenue excludes device revenue.

Wireless business revenue in Q1 rose 6.1% year-on-year to 1.4971 trillion KRW. Wireless service revenue, excluding access revenue, was 1.4081 trillion KRW, up 5.4% from the previous year. Net subscriber additions reached approximately 329,000, a 25.1% increase year-on-year. Notably, 5G subscribers surged by 129.2%, reaching a cumulative total of about 3.335 million. This is attributed to differentiated products such as the 'U+ Together' and mid-priced 5G plans launched earlier this year. MVNO (Mobile Virtual Network Operator) subscribers increased by a remarkable 80.8% to 2.154 million. Effective promotions such as the 'U+ Affordable Coupon Pack' and 'Honey Combination Promotion,' centered on MVNO partners, also made an impact.

The smart home business segment, including IPTV and high-speed internet, continued its growth trend. Smart home business revenue in Q1 was 530 billion KRW. IPTV revenue increased 7.0% year-on-year to 300.7 billion KRW. IPTV subscribers grew 10.4% year-on-year, reaching a cumulative 5.076 million. High-speed internet revenue rose 11.2% to 229.3 billion KRW. Subscribers increased by 5.5% to 4.59 million, with the share of gigabit internet subscribers expanding by 8.1 percentage points to 66.4%.

Revenue in the corporate infrastructure sector, which covers B2B large enterprise business, also increased. The corporate infrastructure segment recorded 341.5 billion KRW, a 9% rise year-on-year, driven by stable growth in solutions and Internet Data Centers (IDC) as well as growth in existing businesses such as corporate lines. IDC sales increased 8.4% year-on-year to 56.2 billion KRW, while solution business sales including relay messaging, web hard, and network solutions rose 11.3% to 98.8 billion KRW. Corporate internet and dedicated line sales grew 7.9% to 186.5 billion KRW.

Marketing expenses decreased as well. Q1 marketing expenses were 548.1 billion KRW, down 3% from the same period last year. The ratio of marketing expenses to service revenue was 22.1%, 2 percentage points lower than the previous year. Capital expenditures (CAPEX) increased 1.4% year-on-year to 380 billion KRW. Wireless network investment rose 10.8% to 173.4 billion KRW, focusing on strengthening network competitiveness such as expanding 5G coverage.

Qualitative Growth in Q2 through 'Customer Value Innovation'

LG Uplus plans to continue strengthening competitiveness in new business areas such as media, content, network, and pricing plans to achieve this year's goal of 'qualitative growth through customer value innovation.' Lee Hyuk-joo, Vice President and Chief Financial Officer (CFO) of LG Uplus, stated, "In Q2, we will continue to innovate services for Uplus's true fan customers and secure competitiveness in new businesses to realize the goal of 10 trillion KRW in service revenue set at the beginning of the year and do our best to enhance shareholder value."

In the media sector, LG Uplus significantly enhanced media services from the customer's perspective, including the exclusive platform for infants and toddlers, 'U+ Idle Nara,' as well as baseball and golf. The revamped 'Idle Nara 4.0' added content linked to homeschooling, and 'U+ Pro Baseball' and 'U+ Golf' included entertaining variety content. LG Uplus also plans to enhance content competitiveness through the 'XR Alliance,' where it serves as the inaugural chair company.

Investment in wired and wireless networks will also be expanded. Investments to expand 5G coverage will be increased within the year, and in-building investments will continue to enable 5G service usage inside buildings. By analyzing 5G signal quality, investments and optimizations will be focused on areas with weak signals to continuously improve user convenience.

Additionally, LG Uplus plans to expand demand in new B2B and B2G business areas such as smart ports, smart cities, and smart industrial complexes. In the promising digital healthcare sector, it continues to explore new business opportunities through collaborations with companies like M3 Solution and Theragen Bio. Cho Won-seok, Executive Director of the Corporate New Business Group, said, "We will generate new sales in the first half of the year through AI-based solutions that detect defects in new products," adding, "In Q2, we plan to expand the entire corporate infrastructure business base, including IDC."

Diversifying Plans to Sustain Net Subscriber Growth

Efforts to reduce customers' cost burdens continue. Earlier this year, LG Uplus sequentially launched Korea's first acquaintance bundling product 'U+ Together,' the lowest-priced '5G Direct Plan' at around 30,000 KRW per month, and mid-priced 5G plans. LG Uplus plans to release new products that enhance the benefits of U+ Together in the future.

The so-called 'ARPU' (Average Revenue Per User) for wireless subscribers, a key metric for mobile carriers, is expected to continue rising through Q2 due to the increase in 5G subscribers. The number of 5G subscribers by the end of this year is expected to exceed the initially targeted 4.5 million. Lee Sang-heon, Head of the Consumer Group, explained, "The ARPU increase in the MNO segment appears to be due to positive factors such as faster-than-planned 5G adoption and an increase in U+ Together bundled customers," adding, "As bundled customers increase, churn rates are expected to decrease, so ARPU is expected to continue rising."

Intent to Address Market Dissatisfaction over Passive Dividends

Regarding market dissatisfaction over passive dividend policies compared to other mobile carriers, LG Uplus showed a willingness to resolve the issue. There were concerns in the market that despite increased profits this year, the total dividend amount would not increase compared to last year. This is because LG Uplus's official dividend payout ratio for 2021 is expected to be '30% or more.' In 2020, LG Uplus's dividend payout ratio based on net profit was 43%.

The company expressed its intention to implement a more proactive shareholder return policy. The establishment of the 'ESG (Environment, Social, Governance) Committee' and the 'Internal Transaction Committee' within the board of directors, announced as part of strengthening sustainable management, reflects this intention. Lee Hyuk-joo, CFO of LG Uplus, emphasized, "I can assure you that this year's dividends will not be absolutely less than last year's," adding, "We plan to achieve much better performance this year compared to last year and provide dividends that are better than what shareholders have received before."

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