SKT Kicks Off Q1 Earnings Strongly... Mid-Tier Plans Remain a Variable (Comprehensive)

1Q 5G Subscribers Increase by 1 Million
SKT Operating Profit 432.4 Billion KRW...15.5%↑
Telecom 3 Companies Combined Expected to Recover 1 Trillion KRW
Mid-Tier Plans and MVNO Regulation Issues

[Asia Economy Reporter Cha Min-young] SK Telecom, the eldest of the three major telecom companies, posted solid results in the first quarter thanks to a favorable increase in 5G subscribers, and the combined operating profit of the three companies is expected to recover to the 1 trillion won level. The number of 5G subscribers increased due to the launch of Samsung Electronics' flagship smartphone 'Galaxy S22' series at the beginning of the year, and the trend of reduced marketing expenses has continued since last year. However, as the number of 5G subscribers has entered the 20 million era, the industry is facing difficulties amid growing pressure to launch a 5G mid-tier plan due to policy changes under the new government.

SKT’s Q1 Operating Profit Up 16%

According to the industry on the 10th, SK Telecom posted an operating profit of 432.4 billion won in the first quarter of this year, up 15.5% from the same period last year. This exceeds the existing market consensus (average estimate) of 398.9 billion won by more than 8%. During the same period, sales increased by 3.99% year-on-year to 4.2772 trillion won. This was due to a net increase of more than 1 million 5G subscribers following the launch of Samsung Electronics' new smartphone Galaxy S22 and a reduction in marketing expenses. In particular, considering the one-time cost of 75 billion won incurred for stock bonuses related to the personnel split, the actual operating profit appears to have increased further. The media sector is also growing. The subscription service 'T Universe' recently surpassed 1 million users, and the metaverse (extended virtual world) service 'Ifland' recorded 1.35 million monthly active users (MAU) as of March.

According to FnGuide, KT and LG Uplus’s first-quarter earnings estimates are 491.3 billion won, up 10.6% year-on-year, and 262.5 billion won, down 4.75%, respectively. Although the combined operating profit in the fourth quarter of last year fell to about 750 billion won due to CAPEX spending, it is expected to recover to the 1 trillion won level again in the first quarter.

5G Mid-Tier Plans and MVNOs Are Variables

The upward trend in earnings is expected to continue into the second quarter. The problem lies in the second half of the year. Pressure to establish a new 5G mid-tier plan is intensifying in line with the launch of the new government. The Presidential Transition Committee hinted at the possibility of introducing a 5G mid-tier plan by stating at the end of last month, "We will expand the selection of 5G plans within the year through consultations with the Ministry of Science and ICT and the three major telecom companies." This is a result of accepting the voices of consumer groups including the Korea Consumer Federation and political circles. The new mid-tier plan is expected to be introduced in the range between 10GB (55,000 won per month) and 110GB (69,000 won per month) of data provided by the three telecom companies.

Some in the market are concerned about a negative impact on stock prices, but the telecom industry considers these concerns excessive. An industry official said, "The mid-tier plan is intended to diversify consumer choices and is not expected to significantly harm profitability," adding, "We have been reviewing various plans in line with the increase in 5G subscribers." Although calls for increased 5G capital expenditure (CAPEX) on network investment have grown, it is also expected to remain at a similar level to previous years.

The regulatory issue surrounding telecom companies’ MVNO (Mobile Virtual Network Operator) businesses is a neutral factor with sharply divided opinions among operators. SK Telecom has indirectly expressed support for telecom companies withdrawing from the MVNO business, while LG Uplus opposes exiting the MVNO market. Based on mobile phone lines, the market share of the three major telecom companies’ MVNO subsidiaries has exceeded 50% in the MVNO market. Yang Jeong-sook, a member of the National Assembly’s Science, Technology, Information and Broadcasting Committee, stated, "While the Ministry of Science and ICT has been delaying improvements to the calculation method since 2021 by listening to the opinions of the three telecom companies, telecom subsidiaries have swept up 51% of mobile phone line subscribers," and has called for regulation of dominance in the MVNO market.

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