5G Subscribers Reach 16 Million... Telecom 4 Companies' Facility Investments Decline

2021 Annual Guidance Falls Short of Last Year
SKT and KT Maintain, LG Uplus Expected to Decline
Telecom Industry: "Last Year’s Large-Scale Investment Was Unusual"
5G Subscriber Net Increase and ARPU Up 1-3%
New 5G Flagship Phone Awaited as Positive Factor

[Asia Economy Reporter Cha Min-young] Although the era of 16 million 5G service users has opened, capital expenditures (CAPEX) by telecom companies, including 5G network facilities, have decreased by 19% compared to the previous year. Even considering seasonal factors, the annual investment scale is expected to be smaller than last year.

According to the industry on the 12th, the total CAPEX of the four companies?SK Telecom, SK Broadband, KT, and LG Uplus?is around 2.8 trillion KRW. This is an 18.6% decrease compared to 3.44 trillion KRW in the same period last year.

SK Telecom and SK Broadband spent 1.0696 trillion KRW in the first half of this year, marking a 27.2% decrease from the same period last year. SK Telecom alone, which is responsible for wireless communication, spent 848 billion KRW, down 30.7% from the previous year. KT recorded 864.1 billion KRW, down 10.7%. LG Uplus spent 863.3 billion KRW, down 13.7%, of which 356.8 billion KRW was allocated to the wireless network sector, a 31.4% decrease.

The telecom industry explains that CAPEX will increase in the second half of the year due to significant seasonal factors. In fact, CAPEX tends to increase from the first quarter to the fourth quarter. Last year, early investment was encouraged by the government amid COVID-19 in the first half, leading to early execution of investments, which caused a base effect this year. A telecom industry official explained, "Last year, telecom companies made unusually large-scale investments to stimulate the economy."

However, the problem is clear on an annual basis. While SK Telecom and KT maintain their usual levels, LG Uplus plans to reduce CAPEX compared to the previous year. Lee Hyuk-joo, Chief Financial Officer (CFO) of LG Uplus, announced during the Q4 earnings conference call last year, "5G facility investment is expected to decrease significantly again this year."

As of the end of June, with domestic 5G subscribers surpassing 16 million, there are calls for telecom companies to be more proactive in investing in network quality. Since the 5G penetration rate for all three companies is still in the low 30% range, the trend of net subscriber increase is expected to continue. The release of new flagship smartphones from Samsung Electronics and Apple in the second half of this year, along with metaverse, augmented reality (AR), and media content, are strong positive factors for the expansion of 5G services.

The average revenue per user (ARPU), a key profit indicator in the telecom industry, also increased for all three companies compared to the previous year. In the second quarter, ARPU was recorded at 30,446 KRW for SK Telecom, 32,342 KRW for KT, and 30,802 KRW for LG Uplus, representing a 1-3% increase year-on-year.

The possibility of expanding CAPEX next year also appears low at this point. SK Telecom stated in the Q2 earnings conference call, "Investment will continue to expand 5G coverage, but investment cost efficiency will be achieved through 5G shared network investment." KT said, "We will maintain last year's CAPEX guidance on an annual basis."

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