Telecom Company Continues Expanding Dividends Amid Successive Treasury Stock Acquisitions and Cancellations

[Asia Economy Reporter Eunmo Koo] Mobile carriers are actively enhancing shareholder value through consecutive acquisitions and cancellations of their own shares. This move is seen as a response to the increasing demand for proactive shareholder return policies, as well as a reflection of confidence in their performance based on the growing number of 5G subscribers. Generally, when a company acquires or cancels its own shares, the number of shares in circulation decreases, which raises the value per share for existing shareholders and is advantageous for dividends.

On the 8th, LG Uplus announced through a public disclosure that it has decided to acquire its own shares worth 100 billion KRW to increase corporate value and strengthen shareholder return policies. This is the first time LG Uplus has acquired its own shares since its establishment. Additionally, the company clarified its plan to introduce interim dividends starting this year.

This decision was finalized by the board of directors after preliminary discussions by the ESG (Environmental, Social, and Governance) Committee established within LG Uplus last month. LG Uplus explained that this decision reflects the capital market’s demand for diversification of shareholder return policies and considers the industry trend emphasizing shareholder value enhancement. Generally, share repurchases can lead to increased cash dividends and higher per-share value from the shareholders’ perspective.

Along with the share acquisition, LG Uplus will introduce interim dividends starting this year. With this decision, shareholders will be able to receive dividends twice a year, both interim and year-end dividends. LG Uplus expects that interim dividends based on semi-annual realized profits will not only flexibly improve shareholders’ cash flow but also positively impact stock price stabilization.

Choi Kwan-soon, a researcher at SK Securities, analyzed, “Despite LG Uplus’s stock price rising more than 30% since the end of last year, the decision to repurchase shares can be interpreted as a signal to the market of the management’s commitment to enhancing shareholder value and confidence in their performance.”

Besides LG Uplus, other mobile carriers have also clearly expressed their intention to continue aggressive high-dividend policies. SK Telecom, which is preparing for a spin-off, has pledged to maintain or increase the existing dividend scale depending on performance after the split. In April, SK Telecom announced a corporate reorganization into a surviving company mainly responsible for telecommunications business and a newly established company handling ICT new businesses such as media, commerce, security, and investment. Along with the reorganization, SK Telecom completed the cancellation of treasury shares worth 2.6 trillion KRW last month to enhance shareholder value.

SK Telecom plans to maintain or increase the existing dividend scale based on performance even after the spin-off. Earlier, Yoon Poong-young, SK Telecom’s Chief Financial Officer (CFO), stated during the first-quarter earnings announcement, “SK Telecom is Korea’s number one wired and wireless telecommunications company. With the full-scale realization of 5G telecommunications performance, operating profit and cash flow are expected to grow steadily, and we will prepare and implement shareholder return policies reflecting this.”

SK Telecom plans to implement quarterly dividends starting from the end of the second quarter this year. The basis for quarterly dividends has already been established through the annual shareholders’ meeting. CFO Yoon said, “Although the dividend payment timing for the first quarter has already passed under the quarterly dividend standard, we will ensure that the annual dividend amount for this year is at least equal to last year’s by adding the first quarter’s dividend amount to the fourth quarter.” SK Telecom also plans to hold a board meeting this week to finalize the governance restructuring plan.

Regarding shareholder returns, KT, which pledged to distribute 50% of separate net income as dividends, also intends to maintain this mid- to long-term dividend policy. In November last year, KT announced the acquisition of treasury shares worth 30 billion KRW. KT will purchase its own shares through NH Investment & Securities until November this year.

With the acceleration of 5G subscriber growth, mobile carriers’ performance improvements are gaining momentum, and demands for enhancing shareholder value are rising, so the trend of increasing dividends by mobile carriers is expected to continue. Kim Hong-sik, a researcher at Hana Financial Investment, said, “As the increase in marketing expenses and depreciation slows down while mobile service revenue grows significantly, operating profit in the telecommunications sector is surging. If the current trend of increasing mobile service revenue continues, expectations for operating profit growth in the telecommunications sector and dividend increases by telecom companies will rise with each earnings announcement.”

Looking at the dividend payout ratios of the three major mobile carriers last year, KT was 49.62%, SK Telecom 47.53%, and LG Uplus 42.09%. The dividend payout ratio refers to the proportion of dividends to net income. The dividend amounts were SK Telecom with an interim dividend of 1,000 KRW and a final dividend of 9,000 KRW, KT with 1,350 KRW, and LG Uplus with 450 KRW, respectively.

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