5G Smooth Sailing Lowers Marketing Burden... Telecom Companies' 2Q Earnings 'Clear'

Operating Profit of Three Companies in 2Q Rises Over 15% YoY
5G Subscribers Increase Smoothly... Marketing Cost Growth Rate ↓ Due to Eased Competition

[Asia Economy Reporter Minwoo Lee] SK Telecom, KT, and LG Uplus, the three major telecommunications companies, are expected to achieve solid results in the second quarter of this year. All three companies are experiencing stable growth in their wireless businesses, and due to eased competition, marketing expenses have not increased significantly, leading to steady profit growth, according to analysis.

On the 17th, DB Financial Investment made these projections regarding the telecom companies' performance. For SK Telecom, consolidated sales for the second quarter are expected to reach KRW 4.8601 trillion, with operating profit of KRW 423.9 billion. This represents increases of 5.6% and 17.9%, respectively, compared to the same period last year. Compared to the previous quarter, sales and operating profit are expected to rise by 1.7% and 9.0%, respectively. These figures exceed market consensus estimates of KRW 4.8337 trillion in sales and KRW 404.8 billion in operating profit. The increase in profits is attributed to a rise in 5G subscribers in an environment where subscriber competition is not intense.

In fact, mobile communication service sales are expected to increase by 2.4% year-on-year to KRW 2.547 trillion, driven by the growth in 5G subscribers. Meanwhile, marketing expenses and depreciation costs have not increased significantly, allowing for favorable operating profits. Subsidiaries are also generally performing well. ADT Caps and SK Broadband continue to maintain stable results, while only 11st, which has recently faced intensified competition, is expected to widen its losses. Shin Eun-jung, a researcher at DB Financial Investment, stated, "Subscription services launching in the second half of the year will drive additional performance growth in the core business and subsidiaries."

KT is expected to deliver solid results in line with market expectations. Sales are projected at KRW 6.106 trillion, with operating profit of KRW 419.2 billion, representing increases of 3.9% and 22.6%, respectively, compared to the same period last year. The smooth increase in 5G subscribers played a significant role. Without aggressive competition, the subscriber base has grown steadily, reaching an accumulated 5 million subscribers and a conversion rate in the mid-30% range. Accordingly, wireless service sales are expected to rise 4.4% year-on-year and 1.1% quarter-on-quarter. Overall expenses are expected to increase by only 2.7%. From this quarter, KT is expected to be the first among the three telecom companies to reduce the amortization burden of marketing expenses that surged during the early 5G launch period. Although subsidiaries such as KT Estate still face lingering COVID-19 impacts, content subsidiaries like Genie Music, KT Alpha, and Nasmedia are expected to continue high growth.

LG Uplus is also performing well. Second-quarter sales are expected to reach KRW 3.5113 trillion, with operating profit of KRW 268.6 billion. Sales and operating profit are projected to increase by 7.3% and 25.4%, respectively, compared to the same period last year, meeting market expectations. Operating profit decreased by 2.5% compared to the previous quarter, but this was due to a one-time gain of KRW 20 billion from improved device margin in the first quarter. Excluding this, operating profit is expected to have grown by 5.3% quarter-on-quarter.

LG Uplus shows the highest growth rate among the three companies. As of the end of last month, the accumulated 5G subscriber base is estimated at 3.7 million, and with the high growth of Mobile Virtual Network Operators (MVNOs), wireless service sales are expected to increase by 5.2%. Researcher Shin said, "In the third quarter, stable overall costs and steady growth are expected to result in favorable performance," adding, "With solid profit growth in the wireless core business, achieving an annual operating profit of KRW 1 trillion this year is highly feasible."

Therefore, DB Financial Investment emphasized that LG Uplus should be particularly noted within the telecommunications sector. Researcher Shin explained, "Among the three companies, LG Uplus, the highest-performing Mobile Network Operator (MNO), is maintaining high growth in performance but has the lowest stock price increase among the three," adding, "Moreover, it is actively improving shareholder return policies, which were weaker compared to others, through share buybacks, interim dividend decisions, and dividend expansions."

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