Telecom Operators' Q1 Operating Profit Expected at 972.8 Billion KRW... Likely a 7.5% Increase YoY
[Asia Economy Reporter Eunmo Koo] Domestic mobile carriers are expected to receive a favorable report card for the first quarter of this year. As the penetration rate of 5G services, which recently celebrated its 2nd anniversary of commercialization, has increased, mobile communication sales have continuously shown growth, and operating expenses are also being managed stably.
According to financial information company FnGuide on the 8th, the combined operating profit of the three mobile carriers for the first quarter of this year is estimated to be 972.8 billion KRW, a 7.51% increase compared to the same period last year. By company, SK Telecom is expected to achieve the largest growth in operating profit with 347.9 billion KRW, up 15.21% year-on-year. During the same period, KT is projected to record 388.1 billion KRW, up 1.31%, and LG Uplus is expected to grow 7.75% to 236.8 billion KRW.
The increase in mobile phone sales driven by the accelerating growth of 5G subscribers is expected to lead the performance improvement of the carriers. The number of new 5G subscribers, which was about 500,000 per month last year, expanded to 1.03 million in January, decreased to around 800,000 in February, but is estimated to have returned to about 1 million in March.
Nam Hyoji, a researcher at KTB Investment & Securities, explained, "The early release of Samsung Electronics' Galaxy S21 at the beginning of the year and the continued sales of Apple's 5G model iPhone 12" and added, "In the first quarter, the combined 5G subscribers of the three companies will increase by 2.97 million, marking the highest quarterly increase since the service commercialization."
The increase in 5G subscribers is expected to expand further as mid-range 5G plans are launched and mid-range 5G devices begin full-scale sales. In particular, as the burden of plans decreases, the migration of 3G smartphone and LTE plan subscribers to 5G is expected to accelerate, raising expectations for long-term performance improvement.
However, average revenue per user (ARPU) for mobile phones is unlikely to grow year-on-year in this first quarter except for KT. Kim Hongsik, a researcher at Hana Financial Investment, explained, "Since the third quarter of last year, KT has shown the fastest rebound in mobile ARPU, and SK Telecom succeeded in reversing the mobile ARPU upward trend after the fourth quarter."
While mobile phone sales are rapidly increasing, operating expenses are expected to be stably managed with increases ranging from 2% to 10% depending on the company. This is because the number of phone sales has not fluctuated significantly, and although subsidies per person have risen compared to the same period last year, they have slightly decreased compared to the previous quarter.
In particular, losses from inventory phones are expected to decrease, improving device sales margins, and advertising expenses stagnated due to COVID-19 are expected to continue this quarter as well. However, the researcher added, "SK Telecom's marketing costs will increase compared to the fourth quarter of last year as the number of subscribers to high-priced plans rises, increasing the cost per acquisition."
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