[Click eStock] KT Benefiting from Wireless Growth... 3Q Operating Profit Expected at 340 Billion Won

5G Penetration Rate Tops for 14 Consecutive Months... ARPU Remains Highest Among the Three Telecom Companies

[Asia Economy Reporter Minwoo Lee] KT is expected to achieve an operating profit of 340 billion KRW on a consolidated basis for the third quarter of this year. Although additional costs were incurred due to retroactive wage increases this year, it is analyzed that the profit improvement trend compared to the previous year will be maintained thanks to the growth of the wireless business division.

On the 7th, Daishin Securities forecast that KT will record consolidated sales of 6.0134 trillion KRW and an operating profit of 344 billion KRW for the third quarter of this year. These figures represent increases of 2.2% and 17.6%, respectively, compared to the same period last year. In the third quarter, about 90 billion KRW in retroactive wage increases for the first to third quarters of this year will be reflected, causing profits to decrease compared to the previous quarter's 475.8 billion KRW, but the profit improvement trend compared to last year is expected to continue.

B2C businesses such as wireless services, internet, and IPTV are expected to see most sales increase compared to the same period last year. In particular, the growth in the wireless sector was remarkable. Sales are expected to increase by about 6% compared to the same period last year, significantly surpassing the 3% sales growth rate of internet and IPTV compared to the same period last year.

The average revenue per user (ARPU) for wireless subscribers is expected to be 32,800 KRW, an increase of 4% compared to the same period last year and 2% compared to the previous quarter. Since the first quarter of 2019, KT has maintained the highest level among the three major telecom companies. SK Telecom and LG Uplus are estimated at 30,900 KRW and 31,700 KRW, respectively. The year-over-year growth rate for both is expected to be around 3%, which is lower than KT's 4%.

Kim Hoejae, a researcher at Daishin Securities, explained, "The reason for the good ARPU performance is that KT continues to maintain leadership in 5G," adding, "As of August, among the 17.8 million 5G subscribers nationwide, KT has 5.43 million (37.9%), achieving the highest penetration rate for 14 consecutive months since July last year."

Meanwhile, the B2B sector is also expected to grow by about 8% compared to the same period last year due to increased demand for corporate lines and increased usage of data centers (IDC).

Against this backdrop, Daishin Securities maintained its 'Buy' investment rating and a target price of 40,000 KRW for KT. The closing price on the previous day was 31,550 KRW.