LGU+ Operating Profit Up 59.2%... 3 Consecutive Quarters of Highest Growth Rate (Update)

[Asia Economy Reporter Kim Heung-soon] LG Uplus announced on the 7th that its operating profit for the second quarter of this year, based on consolidated financial statements, reached 239.7 billion KRW, a 59.2% increase compared to the same period last year. This exceeded market expectations of 213.3 billion KRW by 12.4%. Revenue rose 5.1% year-on-year to 3.2726 trillion KRW. Net profit increased by 52.9% to 150.6 billion KRW.

Despite the adverse effects of the novel coronavirus disease (COVID-19), growth continued as subscribers increased across various business sectors including mobile services, Mobile Virtual Network Operators (MVNO), Internet Protocol Television (IPTV), and high-speed internet. Since the fourth quarter of last year, LG Uplus has recorded the highest operating profit growth rate among mobile carriers for three consecutive quarters.

◆ Mobile and MVNO Subscribers Increase = LG Uplus's mobile service revenue in the second quarter rose 4.9% year-on-year to 1.3475 trillion KRW, supported by steady subscriber growth despite a decline in smartphone sales due to COVID-19.

Mobile subscribers increased by approximately 8% year-on-year for the second consecutive quarter, reaching a cumulative total of 15.859 million. Notably, net subscriber additions were 341,000, up 15.2% year-on-year and 29.4% quarter-on-quarter. LG Uplus attributed this to steady growth in 5G and MVNO subscribers driving subscriber growth.

MVNO subscribers increased by 37.1% year-on-year and 10.3% quarter-on-quarter, supported by policies aiding small and medium-sized operators and channel growth through LG HelloVision and KB LiivM.

◆ IPTV Subscribers Also Increase by 130,000 = Smart home revenue, combining IPTV and high-speed internet, grew 10.5% year-on-year to 494.6 billion KRW due to subscriber growth. IPTV revenue maintained double-digit growth (12.5%) as basic fee revenue increased with subscriber growth despite declines in video-on-demand (VOD) and advertising revenue.

Net IPTV subscriber additions in the second quarter were 130,000, a 42.3% increase year-on-year. High-speed internet revenue grew 7.8% year-on-year, driven by expansion of high-value subscribers such as gigabit internet users.

Enterprise infrastructure revenue reached 345 billion KRW, increasing 2.7% year-on-year and 10.1% quarter-on-quarter, due to expansion in Internet Data Center (IDC) and solution businesses. The IDC business grew 21.6% year-on-year as large-scale contracts continued amid the ongoing untact environment. The solution business achieved growth through increased relay messaging sales and energy solution contract wins.

◆ "Marketing Costs Down, Facility Investment Continues" = Marketing expenses in the second quarter decreased by 1.4% year-on-year and quarter-on-quarter to 556.9 billion KRW. LG Uplus stated, "Although there will be increased sales due to flagship smartphone launches in the second half, we plan to maintain a stable trend in subscriber acquisition costs."

Capital expenditures (CAPEX) in the second quarter rose 66.9% quarter-on-quarter to 625.3 billion KRW, reaching 1 trillion KRW in the first half, which is 40% of this year's guidance of 2.5 trillion KRW. LG Uplus added, "In the second half, we will continue investing to improve data transmission speeds and secure the largest domestic coverage by adding 5G base stations in shadow areas and indoors (in-building)."

◆ Outlook for the Second Half = LG Uplus plans to apply augmented reality (AR) and virtual reality (VR) live production effects to U+ Pro Baseball, golf, and IdolLive, and significantly expand AR and VR educational content for infants and elementary school students.

Cloud gaming marketing will be expanded with domestic game companies, and popular domestic online blockbuster games will be offered. The 5G K-content, which achieved cumulative exports of 10 million USD in the first half, will seek to expand overseas exports in the second half by strengthening killer content such as untact performances and popular idol variety shows.

Regarding LG HelloVision, acquired through mergers and acquisitions (M&A) last year, LG Uplus plans to create synergies through ▲ efficient network operation by jointly building and using networks and lines ▲ discovering corporate customers through joint sales ▲ expanding joint content production.

Lee Hyuk-joo, Vice President and Chief Financial Officer (CFO) of LG Uplus, said, "Despite restrictions on face-to-face sales due to COVID-19 in the first half, we achieved profitability improvement and core business growth. With flagship smartphone launches and expansion of online distribution channels in the second half, we will continue mobile business growth through strengthened untact sales, expand high-value customers in smart home and enterprise infrastructure, and maintain stable growth through 5G B2B business contract wins."