[Comprehensive] LG Uplus Approaching First Ever 'Operating Profit 1 Trillion Won Era'... Also Profitable in Q3

Hwang Hyun-sik, CEO of LG Uplus

[Asia Economy Reporter Joselgina] LG Uplus under the leadership of Hwang Hyun-sik, who emphasizes securing ‘true fans (passionate fans),’ is on the verge of achieving the company’s first-ever ‘operating profit of 1 trillion KRW era.’ In the third quarter, thanks to balanced growth in both wired and wireless businesses and new ventures, it achieved the highest quarterly operating profit since 2010. The synergy from the upcoming partnership with the global online video service (OTT) Disney Plus (Disney+) is also expected to be fully realized soon.

LG Uplus announced on the 5th that its consolidated financial statements showed a 10.2% increase in operating profit for the third quarter of 2021 compared to the same period last year, reaching 276.7 billion KRW. This is the highest quarterly operating profit since 2010. Operating revenue (sales) and service revenue also increased. Operating revenue for the third quarter of this year was 3.4774 trillion KRW, and service revenue was 2.7831 trillion KRW, up 4.1% and 5%, respectively, compared to the same period last year.

The cumulative operating profit up to the third quarter this year was 820.8 billion KRW, an 8% growth compared to the same period last year. If this trend continues, surpassing 1 trillion KRW in annual operating profit this year is highly likely.

Lee Seung-woong, a researcher at Ebest Investment & Securities, evaluated, "It is expected to exceed 1 trillion KRW for the first time in history." Kim Hong-sik, a researcher at Hana Financial Investment, also noted, "While the average revenue per user (ARPU) for mobile phone subscribers is growing, marketing costs are showing a downward stabilization trend, and depreciation expenses are in a stagnant phase."

◆Balanced Growth Driving Strong Performance... Both Wired and Wireless Businesses Thrived

This strong performance is interpreted as a result of the 5G subscriber effect being clearly reflected in the core mobile network operator (MNO) business, as well as new businesses such as media and B2B (business-to-business) settling on a growth trajectory.

First, third-quarter wireless business revenue recorded 1.5233 trillion KRW, a 4.2% increase compared to the same period last year. Wireless service revenue excluding access revenue was 1.4343 trillion KRW, up 3.6% year-on-year. The total wireless subscribers, combining MNO and MVNO, reached 17.497 million, a 7.6% increase compared to the same period last year.

5G subscribers reached 4.108 million, an 89.1% increase year-on-year, influenced by the launch of flagship devices such as the Galaxy Z Fold3 and Galaxy Z Flip3. The penetration rate is 36.1%, with a 40% achievement within the year highly likely. The average revenue per user (ARPU) stood at 30,748 KRW, continuing its upward trend.

MVNO subscribers reached 2.547 million, a 73.4% increase year-on-year. The continuous activation policies for budget phones, including the launch of specialized budget phone plans and promotional support, are analyzed to have driven subscriber growth. Meanwhile, third-quarter marketing expenses decreased by 2.8% year-on-year to 564.7 billion KRW.

The smart home business, including IPTV and high-speed internet, as well as corporate infrastructure businesses such as smart factories and IDC, continued double-digit growth, leading to overall performance improvement.

Third-quarter smart home segment revenue increased 10.5% year-on-year to 568.5 billion KRW. IPTV business revenue achieved 329 billion KRW, a 12.4% increase compared to the same period last year. Influenced by the exclusive service for infants ‘U+ Idle Nara,’ the speaker-type set-top box ‘Soundbar Black,’ and expectations for partnership with the global OTT service ‘Disney Plus,’ IPTV cumulative subscribers increased 8.8% year-on-year to 5.265 million.

High-speed internet revenue was 239.5 billion KRW, up 8.1% year-on-year. The share of giga internet subscribers increased by 6.9 percentage points compared to the same period last year, reaching 69.4%. Cumulative high-speed internet subscribers also rose 4.9% to 4.693 million.

The corporate infrastructure business, a new growth engine, also maintained its growth trend. Corporate infrastructure business revenue, including new business for enterprises and line business, increased 11.3% year-on-year to 369.1 billion KRW. The IDC business also continued growth, contributing to the improvement of corporate infrastructure business revenue. Due to increased cloud demand following the transition to a non-face-to-face society, third-quarter IDC business revenue rose 19.6% year-on-year to 68.1 billion KRW.

Additionally, B2B solution business revenue, including smart factories, achieved 115.5 billion KRW, a 22.5% increase compared to the same period last year, and corporate line business revenue, including corporate internet and dedicated lines, recorded 185.6 billion KRW, up 2.8% year-on-year.

◆"Presenting Better Results Next Year"... Expecting Synergy from Partnerships like Disney+

LG Uplus aims to present better results next year, including 5% growth in the wireless market. In particular, it is focusing on strengthening service competitiveness by differentiating content and enhancing platform services.

Following the exclusive partnership with the world’s largest music platform Spotify this year, synergy effects are also expected from the exclusive mobile and IPTV partnership with Disney+, which will launch its service in Korea starting on the 12th. Similar to the subscriber growth effect experienced when partnering with Netflix for the first time in Korea in 2018, it is anticipated that the partnership effect will be realized once again.

During the conference call held this afternoon, LG Uplus stated, "We have signed exclusive partnerships not only for mobile but also for IPTV," adding, "The significance of this partnership lies in securing customer superiority perception regarding OTT services." Furthermore, they forecasted, "Because we can offer differentiated rates and programs compared to competitors, it will fundamentally have a positive impact on mobile and IPTV growth." Partnership plans including pricing and programs with Disney+ will be disclosed next week.

Going forward, LG Uplus plans to gradually expand non-telecommunication business revenue. Earlier, CEO Hwang stated at a press conference that they intend to accelerate new businesses in six major sectors?artificial intelligence (AI), big data, cloud, security, B2B solutions, and content?to raise the proportion of non-telecommunication sales to 30%.

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