Hana: "Frequency Auction May Trigger Big Cycle for Telecom Equipment by Year-End"

Securities analysts have reported that the likelihood of a major cycle for the domestic telecommunications equipment industry has increased, as 'frequency auctions,' which serve as a barometer for network investment, are scheduled to take place in both the United States and South Korea in the second half of this year. It is expected that, starting in the fourth quarter of this year, the performance of domestic telecommunications equipment companies will improve significantly, leading to a turnaround in their stock prices.

On April 24, Kim Hongsik, a researcher at Hana Securities, stated in his report, "Wireless Communications - Increased Likelihood of Entering a Big Cycle by the End of 2025," that "since frequency auctions are expected to be held in the fall of 2025 in both the United States, the world's largest market, and South Korea, which stands to benefit significantly, it is necessary to pay close attention to this development."

Kim noted, "Frequency auctions have always been a signal for investment and have served as a catalyst to heat up the previously stagnant equipment investment environment." He also predicted that, along with major countries' frequency auctions, high-frequency investments would begin in earnest.

Specifically, he said, "In the case of the United States, the 4GHz band has a bandwidth of 220MHz, which is substantial, so winning the auction is expected to bring significant benefits." He added, "Although there is skepticism about additional 5G frequency allocations in Korea, considering the high risk of operators relinquishing their frequencies, there is a strong possibility of additional 3.7GHz 5G frequency allocations in 2025. Opportunities are expected to arise in Korea in 2026." Regarding the view that network investments by domestic and international telecom operators will only resume around the end of 2028, when 6G investments are expected to begin, he assessed that "the losses could outweigh the gains," suggesting this scenario is unlikely.

Kim also stated, "With growing concerns over telecom operators' revenue growth, there will ultimately be attempts to upgrade plans and pursue upselling through speed improvements enabled by new frequency investments, as well as the adoption of artificial intelligence (AI) and quantum cryptography communications." He added, "In particular, the US market is expected to see not only new frequency investments but also an expansion in the share of the open system, Open RAN."

Accordingly, Kim predicted that the performance of domestic telecommunications equipment companies would improve from the fourth quarter of this year. He said, "There is even the possibility of a big cycle," and diagnosed, "With the US market showing signs of recovery, there is potential for the domestic market to bloom as well."

He continued, "While significant performance improvements are expected to materialize in 2026, stock prices are likely to begin turning upward from 2025." He recommended focusing investments on leading companies first. Specifically, he highlighted Solid, RFHIC, Innowireless, and KMW, whose PBRs have fallen below 1, as companies that deserve particular attention.