Lee Gyu-lee is a business writer at The Korea Times, focusing primarily on IT & telecommunications, the Ministry of Trade, Industry and Energy and KOTRA. Prior to this, she has covered a wide range of cultural news, from film, television and K-pop to lifestyle and fashion.
Data breach scandals drag down telecoms’ Q3 earnings
People walk pass SK Telecom's retail store in central Seoul, Sept. 23. Yonhap
By Lee Gyu-lee
The telecom sector is bracing for a steep drop in third-quarter earnings as the fallout from a series of cybersecurity incidents continues to weigh, with the combined operating profit of the three major telecoms — SK Telecom, KT and LG Uplus — expected to slip below the 1 trillion won ($705 million) mark.
According to financial data provider FnGuide, the three carriers’ aggregate third-quarter operating profit is projected at around 829.2 billion won, a roughly 33 percent fall year-on-year from more than 1.24 trillion won.
The main reason behind the slump is SK Telecom’s large-scale leak of the universal subscriber identity module (USIM) data of nearly 27 million users.
Analysts warn that the company could post its first quarterly loss since it began releasing earnings, with regulatory fines, compensation payouts and customer losses from the data breach dragging down its overall performance.
The company’s third-quarter revenue is estimated at about 3.94 trillion won and operating profit at 43.7 billion won, plunging 12.96 percent and 91.8 percent, respectively, from the same period last year. It is expected to post a consolidated operating loss of 27.4 billion won.
The projected losses stem from an approximately 1 trillion won compensation program for subscribers and a 134.8 billion won fine, coupled with customers switching to a different provider following the incident.
In August, SK Telecom rolled out a 5 trillion won-scale compensation package, including a 50 percent discount on mobile rates, an extra 50 gigabytes of data through year-end and expanded partnership discounts. The company was also hit with the largest-ever penalty from the Personal Information Protection Commission for neglecting safety measures and delaying notifying its users.
Activists from civic groups hold a press conference in front of KT’s headquarters in central Seoul, Sept. 15, calling for a thorough investigation into data breach cases involving SK Telecom and KT. Yonhap
On the other hand, KT and LG Uplus are expected to report relatively steady earnings.
KT is forecast to post 6.87 trillion won in revenue and an operating profit of 534.5 billion won, up 3.3 percent and 15.16 percent year-on-year, despite its recent mobile payment breach incident.
The company benefited from acquiring about 280,000 subscribers who switched from SK Telecom after the USIM data breach, as well as strong performances in its cloud and data center businesses.
LG Uplus is projected to record 3.89 trillion won in revenue and an operating profit of 251 billion won, modest increases of 2.37 percent and 2.02 percent compared to last year.
However, profitability across the three carriers is likely to stay weak through the fourth quarter, especially as KT continues to suffer from unauthorized mobile payment fraud cases. Two Chinese nationals allegedly used illegal base stations to intercept verifications needed to make mobile transactions.
A government-private joint investigation team reported Thursday that 20 more illegal base stations have been found so far, in addition to the four that KT already confirmed were used in the scheme.
The breach is estimated to have exposed the international mobile subscriber identity of about 5,561 users, with KT later confirming 362 victims and roughly 240 million won in losses from unauthorized payments.