Telecom Stocks Shrink Amid 'Junggan Yogeumje' Push... "Excessive Concerns Should Be Avoided"

Interpretation as Pressure to Lower Communication Fees
Stock Market: "Avoid Excessive Concerns"

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] Stocks in the telecommunications sector have recently experienced a sharp decline amid concerns over potential price cuts. This follows news that the Presidential Transition Committee (PTC) is pushing for the introduction of a mid-tier 5G pricing plan. However, securities firms have advised that there is no need for excessive worry.

According to industry sources on the 2nd, the PTC selected a public proposal requesting the establishment of a mid-tier 5G pricing plan as an outstanding public suggestion on the 27th of last month, and plans to introduce the mid-tier plan within this year. Currently, major telecom companies do not offer a mid-tier 5G plan providing data between 10 and 100GB, and the committee intends to create such a plan priced around 60,000 KRW.

Concerns that the introduction of a mid-tier plan would effectively pressure telecom companies to lower fees led to consecutive declines in related stocks. When the news first broke on the 27th of last month, LG Uplus closed at 13,800 KRW, down 6.12% from the previous trading day. On the same day, SK Telecom and KT also fell by 3.73% and 1.54%, respectively. It is interpreted that investor sentiment weakened as President-elect Yoon Seok-yeol, who did not pledge to reduce telecom fees during the presidential campaign, announced the introduction of the mid-tier plan.

However, securities firms have repeatedly advised against excessive concern. KB Securities analyst Junseop Kim analyzed, "Assuming 33% of mobile subscribers receive a uniform 7,000 KRW fee reduction, the combined quarterly revenue of the three telecom companies would decrease by about 150 billion KRW," adding, "It is also expected that some subscribers will upgrade to higher-tier plans." Similarly, Hyerim Lim, an analyst at Korea Investment & Securities, stated, "Since this is not a regulation that directly causes telecom fee reductions, the impact of this pledge on earnings is limited," recommending buying during price adjustments.

There is also analysis suggesting that the launch of mid- to low-priced plans will not affect the average revenue per user (ARPU) for telecom companies. Hongshik Kim, an analyst at Hana Financial Investment, noted, "A downward shift in 5G subscriber plan adoption and ARPU decline is somewhat natural, and the 3-4% growth trend in mobile revenue from 2022 to 2023 remains valid."