The Big Three Telecoms Hold Steady in Q3 Earnings... Will They Surpass the '1 Trillion Won Wall' in Q4?

Operating Profit Expected to Surpass 1 Trillion Won for Three Consecutive Quarters

The three major mobile carriers

The three domestic mobile carriers in South Korea are expected to record a combined operating profit of 1 trillion KRW for three consecutive quarters. Now, industry insiders have started to speculate whether they can break the '1 trillion KRW operating profit' barrier even in the fourth quarter, which has traditionally shown weak performance due to seasonal factors.

On the 7th, LG Uplus announced that it recorded consolidated sales of 3.5811 trillion KRW and an operating profit of 254.3 billion KRW for the third quarter of this year. Sales increased by 2.3% compared to the same period last year, while operating profit decreased by 10.8%. The decline in operating profit was due to increased other expenses caused by higher electricity rates.

KT, which had suffered management risks due to the absence of a CEO, is also expected to perform well in the third quarter. KT is scheduled to release its earnings report later that afternoon. Meritz Securities forecast that KT will record sales of 6.73 trillion KRW and an operating profit of 346 billion KRW. Sales increased by 3.8% year-on-year. However, operating profit fell by about 23.6%, due to labor union negotiation costs amounting to 120 billion KRW. Typically, labor negotiation costs are reflected in the fourth quarter, but this year they were recognized early in the third quarter due to an early settlement.

SK Telecom, which is scheduled to announce its earnings on the 8th, is expected to record sales of 4.4237 trillion KRW and an operating profit of 487.6 billion KRW. These figures represent increases of 1.85% and 4.74%, respectively, compared to the same period last year.

According to securities firms’ forecasts, the combined operating profit of the three telecom companies will be 1.0879 trillion KRW. This strong performance appears to be largely driven by the increase in 5G subscribers. With the 5G penetration rate exceeding 50% and marketing costs decreasing, the current level of operating profit has been maintained. According to the wireless communication service subscription status compiled by the Ministry of Science and ICT, the number of 5G subscribers reached 31,508,059, an increase of 407,956 from the previous month. By company, SKT has 15,009,720 subscribers, KT has 9,433,889, and LG Uplus has 6,755,872.

LG Uplus stated, “Efforts to innovate customer experience, such as 5G plans offering increased benefits based on usage patterns by generation and customized plans with selectable options according to 5G usage, are yielding results.”

There is also interest in whether this positive performance trend will continue into the fourth quarter. The mobile carriers have historically struggled to escape poor results in the fourth quarter. This is because costs related to network infrastructure construction and maintenance are concentrated at the end of the year, causing capital expenditure (CAPEX) to rise significantly. Additionally, bonuses, retroactive wage increases, and distribution channel commission fees further drag down fourth-quarter performance.

Looking at the quarterly combined operating profit trends of the three telecom companies last year, they exceeded 1 trillion KRW for three consecutive quarters with 1.3202 trillion KRW in Q1, 1.1672 trillion KRW in Q2, and 1.2036 trillion KRW in Q3, but recorded only 692.5 billion KRW in Q4.

Until now, the combined operating profit of the three telecom companies has never surpassed 1 trillion KRW in the fourth quarter. This year, since KT’s labor negotiation costs were recognized early in Q3, the Q4 results are expected to improve significantly. Therefore, there is an analysis that the combined operating profit of the three carriers could approach 1 trillion KRW.

Each telecom company also expects to record higher operating profits in Q4 compared to the previous year. This expectation is based on the increase in 5G subscribers and the growth of non-telecom businesses centered on B2B (business-to-business). A telecom industry insider said, “With the increase in 5G subscribers, demand for cloud and data centers (IDC) continues to grow,” adding, “If operating expenses are well controlled, we can expect high operating profits in Q4 as well.”

The main variable that could pressure the 1 trillion KRW operating profit target is the government’s push to reduce telecom fees. Even if profits increase through cost control, government intervention could cause profits to fall again. Ultimately, to open the era of combined operating profits of 1 trillion KRW in Q4, success in new business areas beyond traditional telecom services is deemed necessary.

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