The Three Major Telecom Companies Expected to Surpass 1 Trillion Won in Operating Profit Again in Q3

SKT 487.6 Billion KRW, KT 431.9 Billion KRW, LGU+ 279.1 Billion KRW Expected

The combined quarterly operating profit of the three domestic mobile carriers is expected to surpass 1 trillion won once again. However, due to the slowdown in 5G subscriber growth and government pressure to reduce communication fees, profitability is expected to weaken in the fourth quarter of this year.

On the 26th, market information firm FnGuide estimated that the operating profit of the three carriers in the third quarter of this year will be 1.1693 trillion won. This is about a 5% increase compared to the same period last year, marking three consecutive quarters of operating profits exceeding 1 trillion won. By company, SK Telecom recorded 487.6 billion won, KT 431.9 billion won, and LG Uplus 279.1 billion won.

This strong performance appears to be largely driven by the increase in 5G subscribers. With the 5G penetration rate surpassing 50% and marketing costs decreasing, it is analyzed that the current level of operating profit could be maintained. According to the wireless communication service subscription status compiled by the Ministry of Science and ICT, the number of 5G subscribers reached 31,508,059, an increase of 407,956 from the previous month. By company, SKT had 15,009,720 subscribers, KT 9,433,889, and LG Uplus 6,755,872.

However, it is uncertain whether this streak of strong performance will continue. While the growth rate of 5G subscribers is slowing, the number of consumers switching to budget phones to reduce the burden of expensive fees is increasing. The number of budget phone subscribers, which was 12,056,120 in August last year, has steadily increased to 14.94 million as of the end of August this year. It is expected to surpass 15 million within this year.

Above all, the government's pressure to reduce communication fees is expected to pose a significant burden on the performance of the three carriers. Earlier in July, Lee Jong-ho, Minister of Science and ICT, announced the 'Measures to Promote Competition in the Telecommunications Market,' expressing the intention to lower the minimum price of 5G plans to the 30,000 won range. He stated, "We will actively negotiate with telecom companies regarding the minimum fee plans so that not only plans in the 40,000 won range but also intermediate plans below that will be introduced," and added, "As fees decrease, the cost per data unit becomes expensive, but we will actively discuss with telecom companies to find possible solutions."

Subsequently, LG Uplus introduced a mid-tier 5G plan called 'Nugget' priced in the 30,000 won range per month, and SKT and KT are preparing similar plans. As the number of subscribers to low-cost plans increases, the average revenue per user (ARPU) inevitably decreases.

Therefore, the performance of the three carriers is expected to decline in the fourth quarter of this year. Market forecasts predict a combined operating profit of 850 billion won for the three carriers, with each expected to earn operating profits in the range of 270 to 280 billion won.