LGU+ Hit by Electricity Rate Hike... Operating Profit Down 10.8% (Comprehensive)

LG Uplus's third-quarter operating profit decreased by more than 10% compared to the same period last year due to the impact of electricity rate hikes. However, with the launch of flagship devices and growth in MVNO and roaming sales expected in the fourth quarter, achieving an annual operating profit of 1 trillion KRW appears to be feasible.

LG Uplus announced on the 7th that its third-quarter revenue (consolidated basis) reached 3.5811 trillion KRW, up 2.3% from the same period last year. Service revenue excluding device sales also increased by 2.3% to 2.9052 trillion KRW compared to the same period last year.

However, operating profit recorded 254.3 billion KRW, down 10.8% year-on-year due to the impact of increased electricity costs. Initially, financial information provider FnGuide had forecasted LG Uplus's third-quarter operating profit to increase by 0.9% year-on-year to 287.8 billion KRW.

Yeomyeonghee, LG Uplus's Chief Financial Officer (CFO), explained during the earnings conference call that the operating profit fell short of market expectations because "electricity costs increased about three times since the end of last year, leading to higher operating expenses compared to the same period last year and the previous quarter," and "amortization expenses for intangible assets related to the additional 20 MHz frequency acquired to improve 5G network quality also increased."

He added, "In the fourth quarter, with the launch of flagship devices, growth in MVNO and roaming sales, and seasonal effects, revenue is expected to grow, and the annual operating profit is likely to meet or exceed market expectations due to corporate infrastructure."

Marketing expenses were recorded at 553.2 billion KRW, down 2.0% from last year. The marketing expense ratio relative to service revenue improved by 0.9 percentage points year-on-year to 20.6%.

The wireless business in the third quarter posted revenue of 1.587 trillion KRW, up 2.7% year-on-year.

The total number of wireless subscriptions grew by more than 20%. In the third quarter of this year, total wireless subscriptions reached 23.82 million, a 22.3% increase compared to the same period last year, marking six consecutive quarters of double-digit growth. Net additions in the third quarter were 2.143 million subscriptions, a 324.4% increase from 505,000 in the same period last year.

Revenue from corporate infrastructure businesses, including new business for enterprises, Internet Data Centers (IDC), and line services, also continued to grow, increasing by 7.9% year-on-year to 404 billion KRW.

Third-quarter IDC business revenue grew 18.2% year-on-year to 82.7 billion KRW, showing the highest growth among corporate infrastructure sectors. LG Uplus expects the IDC business growth to gain momentum once the 'Pyeongchon 2 Center' data center, completed last month, becomes fully operational.

Lim Janghyuk, head of LG Uplus's Corporate New Business Group, said during the third-quarter earnings conference call, "The newly built Pyeongchon IDC 2 Center has all 12 computer rooms fully booked due to high demand for high-spec data centers, and negotiations are ongoing with pre-booked customers. Revenue is expected to start sequentially from the first half of next year."

He added, "Regarding additional IDC construction, we are looking for new sites aiming for a 2027 opening, but it is difficult to specify details at this time. We are searching for IDC sites that can easily respond even if demand surges explosively."

Solution business revenue increased by 17.5% year-on-year to 129.2 billion KRW. LG Uplus provides car infotainment platforms to KG Mobility and Toyota, and supplies 'U+ Mobile TV' to Hyundai Kia Motors.

The smart home (Internet, IPTV) segment posted revenue of 607.2 billion KRW, up 2.8% compared to the third quarter of last year.

LG Uplus also expressed its ambition to become a 'Top 3' player in the electric vehicle charging market, considered a future growth area.

CFO Ye said, "The electric vehicle charging service brand VoltUp plans to install 10,000 chargers within this year, focusing on large apartment complexes and offices, and 50,000 chargers by 2026. Through business cooperation with Hoban Construction, we plan to establish and operate EV charging services within apartments, and jointly develop ceiling-type EV charging systems specialized for domestic residential environments with Hanwha Construction to supply to newly built apartment complexes."

He added, "We will initially target the slow charging market and strengthen the business to become a 'Top 3' player within three years."

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