5G-Driven Efficient Cost Execution Achieves Good Results with 7 Consecutive Days of Increase VS Marketing Costs Significantly Expanded, Continuous New Lows
[Asia Economy Reporter Eunmo Koo] The stock price trajectories of LG Uplus and SK Telecom are diverging. In the marketing competition to attract 5th generation mobile communication (5G) subscribers, LG Uplus has achieved efficient cost control, whereas SK Telecom still appears to be hampered by increased expenses.
According to the Korea Exchange on the 13th, LG Uplus closed the previous day’s trading at 14,250 KRW, up 1.06% (150 KRW) from the previous trading day. LG Uplus has risen for seven consecutive trading days, recording a 9.2% return during this period. In contrast, SK Telecom, the leading telecom stock, has been hitting new lows day after day. SK Telecom fell to 222,000 KRW intraday the previous day, setting a new 52-week low, and has shown a negative return of 4.8% since the beginning of the year.
The strong Q4 earnings last year, which significantly exceeded market expectations, are interpreted as driving LG Uplus’s stock price upward. LG Uplus’s Q4 operating profit last year was 185.1 billion KRW, a 77.8% increase compared to the same period the previous year, and sales also rose 3.8% to 3.2938 trillion KRW. Efficient cost execution is credited for the strong performance. Some performance bonuses were reversed, reducing labor costs, and advertising expenses decreased by more than 20% compared to the same period last year. The wireless business and smart home business also contributed by delivering results as expected.
SK Telecom, which saw a significant increase in marketing expenses, is experiencing poor earnings that negatively affect its stock price. SK Telecom’s Q4 operating profit last year was 162.5 billion KRW, down 27.9% from the same period the previous year. Hakmoo Lee, a researcher at Mirae Asset Daewoo, explained, “The deferred effect of marketing expenses incurred in Q3 last year to compete for 5G market share appeared significantly, and advertising spending increased sharply compared to the previous quarter, which also had an impact.”
The divergent paths are expected to continue for the time being. LG Uplus is anticipated to see profit improvement accelerate as 5G subscribers steadily increase this year. Its stock price is also expected to maintain a positive trend. Euljung Yoon, a researcher at Shin Young Securities, predicted, “LG Uplus’s 5G market share is at a higher level compared to the LTE market, and 5G service subscribers are continuously increasing, so the wireless average revenue per user (ARPU) could rebound in the first half of this year.” Additionally, the smart home business division’s IPTV sales continue to grow strongly, and the marketing cost competition to attract 5G subscribers has settled, which is also seen as a positive factor for profit improvement.
On the other hand, SK Telecom is expected to need more time before its stock price rises. Hongsik Kim, a researcher at Hana Financial Investment, said, “Due to the slowdown in net increase of 5G subscribers, the growth in mobile phone sales revenue is low, so it seems that more than six months will be needed before operating profit performance rebounds,” adding, “Concerns about cost increases remain significant.” Recent announcements by telecom executives lowering 5G penetration rate forecasts are also considered negative news for SK Telecom’s stock price. Hyoji Nam, a researcher at KTB Investment & Securities, predicted, “Since performance improvement is occurring in non-telecom businesses, if confidence in a rebound in mobile network operator (MNO) revenue is established, the stock price could rise.”
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