Operating Profit '4.5 Trillion Won'... Record-Breaking Performance Expected for the Three Major Telecom Companies

Telecom 3 Giants Achieve Record High Revenue and Operating Profit Last Year
LG U+ Expected to Join '1 Trillion Club' for the First Time
Strong Performance in Non-Telecom Sectors Including Content and Data Centers (IDC)

[Asia Economy Reporter Kang Nahum] It appears that the three major telecom companies?SK Telecom, KT, and LG Uplus?achieved record-high sales and operating profits last year. The increase in 5G subscribers with higher Average Revenue Per User (ARPU) and strong performance in non-telecom new businesses drove the excellent results. However, the growth of the MVNO market and government pressure to improve mid-tier pricing plans may pose challenges going forward.

On the 25th, financial information firm FnGuide predicted that the combined sales of the three telecom companies would reach approximately 57 trillion KRW, a 4.78% increase from the 54.4 trillion KRW recorded the previous year. The combined operating profit estimate was 4.45 trillion KRW, expected to rise by about 9.25%.

By company, SK Telecom is expected to have recorded sales of 17.3245 trillion KRW and operating profit of 1.6613 trillion KRW last year, representing increases of 3.44% and 19.76%, respectively, compared to the previous year. KT’s sales last year are projected at 25.6044 trillion KRW, up 2.84%, with operating profit improving by 3.79% to 1.7352 trillion KRW.

LG Uplus’s estimated sales are 13.9582 trillion KRW, with operating profit at 1.0223 trillion KRW, marking increases of 0.77% and 4.42%, respectively, compared to the previous year. Notably, operating profit is expected to surpass 1 trillion KRW for the first time since the company’s founding, joining the '1 trillion club.'

This strong performance is mainly attributed to the increase in ARPU driven by the growth in 5G subscribers. According to the 'Wireless Communication Service Statistics Status (as of November 2022)' recently released by the Ministry of Science and ICT, the number of 5G subscribers reached 27,551,374. As of the end of November last year, the 5G share was about 57%, already exceeding the majority. The ARPU of 5G subscribers is 1.4 to 1.6 times higher than that of LTE subscribers.

Minister Lee Jong-ho of the Ministry of Science and ICT is attending the CEO meeting of the three major telecommunications companies held at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, on the afternoon of the 11th, and is taking a commemorative photo. From the left, Yoo Young-sang, CEO of SK Telecom; Lee Jong-ho, Minister of Science and ICT; Koo Hyun-mo, CEO of KT; Hwang Hyun-sik, CEO of LG Uplus. Photo by Moon Ho-nam munonam@

Strong performance in non-telecom sectors such as content and data centers (IDC) also contributed to the excellent results. For SK Telecom, IDC revenue steadily increased from 3.62 billion KRW in Q1 to 3.71 billion KRW in Q2 and 4.03 billion KRW in Q3 last year. KT’s cumulative order volume for its DigiCo B2B business increased by 21% compared to a year earlier through Q3.

However, the growth of the MVNO market and government pressure to improve mid-tier pricing plans are considered risks to growth. Over the past year, MVNO subscribers increased by more than 2 million, exceeding the combined subscriber growth of the three telecom companies.

Given this trend, some predict that the number of MVNO subscribers this year could surpass LG Uplus’s 15.96 million subscribers, which ranks third in the market.

Additionally, the government is urging the introduction of various 5G mid-tier pricing plans in the 40?100GB range. The industry expects that while this may bring short-term subscriber gains, it could negatively impact profitability in the long term.

Choi Nam-gon, an analyst at Yuanta Securities, said, "The government is calling for an expansion of 5G mid-tier pricing plans and is asking telecom operators to make some sacrifices in terms of price control. If this issue escalates, it is inevitable that ARPU will be negatively affected."