"Mobile Carriers' Q4 Earnings Expected to Fall Short... Large One-Time Labor Cost Expenses"

Securities Industry Expects Lower Year-on-Year Operating Profits for Three Mobile Carriers
One-Time Labor Costs, Including Retirement Pay, Weigh on All Three Carriers
Outlook for This Year Remains Positive... Less Impact from the Mobile Device Distribution Act, High Hopes for AI

The fourth-quarter earnings of the three mobile carriers last year are expected to fall short of market expectations due to one-time labor cost expenses related to restructuring.

The three major mobile carriers

According to the securities industry on the 16th, the fourth-quarter operating profits of the three mobile carriers are expected to fall short of market expectations. Shinhan Investment Corp. forecasted SK Telecom's operating profit to decrease by 21.8% year-on-year to 232.3 billion KRW, KT to turn to an operating loss of 690 billion KRW, and LG Uplus to decline by 17.6% to 161.1 billion KRW compared to the previous year. Heungkuk Securities also predicted SKT's operating profit at 232 billion KRW and KT's operating loss at 743.7 billion KRW. Yuanta Securities expected LG Uplus's operating profit to decrease by 18.8% year-on-year to 158.8 billion KRW.

The negative outlook for the three carriers' fourth-quarter results is mainly due to large one-time labor cost expenses. Aram Kim, Senior Researcher at Shinhan Investment Corp., analyzed, "SK Telecom incurred more than 80 billion KRW in one-time labor costs due to voluntary retirement, KT had 1 trillion KRW from workforce reallocation conducted in December, and LG Uplus had over 50 billion KRW in one-time labor costs related to provisions for the ordinary wage ruling." Other securities analysts forecasting the fourth-quarter results of each company also cited similar reasons.

Earlier, SK Telecom implemented a retirement program in the second half of last year that provided consolation payments of up to 300 million KRW per employee. KT conducted on-site workforce restructuring, resulting in about 2,800 employees retiring and about 1,700 transferring to subsidiaries. Regarding LG Uplus, Senior Researcher Kim noted that provisions for retirement pay arise due to the ordinary wage ruling. This is because the Supreme Court's December ruling included regular bonuses as part of ordinary wages. Ordinary wages refer to the amount regularly paid for fixed labor, which serves as the basis for various allowances, and the average wage used to calculate retirement pay has increased.

However, the earnings outlook for the three carriers this year is expected to improve compared to last year. Analysts forecast that despite the abolition of the Mobile Device Distribution Act, marketing competition will not intensify as 5G services enter a mature phase. They also have high expectations for growth in B2B business and AI monetization. In their New Year's messages, SKT emphasized AI business monetization, KT highlighted B2B business achievements through collaboration with Microsoft, and LG Uplus stressed advancing as an AI transformation (AX) company that prioritizes customers.