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.
Telecoms set for mixed Q2 as AI investment race looms
A telecom retail store in Seoul / Yonhap
By Lee Gyu-lee
SK Telecom, LG Uplus to see growth while KT's expected earnings drop
Major telecom companies — SK Telecom, KT and LG Uplus — are expected to report mixed second-quarter earnings, as diverging cost structures and one-off factors shape performance ahead of a broader push into artificial intelligence (AI) investments in the second half of the year.
SK Telecom is expected to see a sharp rebound from the damage of its hacking incident last year and LG Uplus will see stable growth, while KT is expected to see earnings decline amid continued cost pressures.
According to consensus forecasts compiled by FnGuide, the three telecom operators are expected to post combined second-quarter revenue of 15.2 trillion won ($10.1 billion) and operating profit of 1.45 trillion won.
Revenue is forecast to rise 2.6 percent from a year earlier, while operating profit is expected to decline 12.7 percent, largely due to weaker performance at KT.
SK Telecom is projected to post a sharp rebound in operating profit. Its estimated second-quarter revenue is at 4.41 trillion won, while operating profit is 527.9 billion won, up about 56 percent from a year earlier.
The improvement largely reflects the absence of one-off costs tied to last year’s universal subscriber identity module (USIM) hacking incident, including subscriber losses, SIM replacement and customer compensation.
“(SK Telecom's) cost efficiency gains are continuing as marketing competition eases and follow-up 5G investments remain limited,” said Lee Da-yeon, an analyst at Daol Investment & Securities. "Profitability, which was hit by last year's USIM hacking incident, is expected to recover to a normal level this year."
KT CEO Park Yoon-young gestures during a press conference on the company's artificial intelligence transformation business plans in Seoul, Monday. Yonhap
LG Uplus is also expected to maintain steady earnings, supported by lower labor costs following voluntary retirement programs, stable operating expenses and continued subscriber growth. Market consensus points to second-quarter revenue of 3.91 trillion won and operating profit of 312.2 billion won.
KT, however, is expected to be the only major carrier to report weaker profitability, with an estimated 40 percent drop year-over-year in operating profit to about 609 billion won in the second quarter. Its revenue is projected at 6.89 trillion won.
The decline is mainly due to a high base effect from last year, when its subsidiary KT Estate booked significant one-off gains from a major property development project. Additional pressure from customer compensation programs introduced earlier this year and rising operating costs is also expected to weigh on margins.
Second-quarter earnings are seen as a key gauge of telecom operators’ financial flexibility to fund capital-intensive AI initiatives, including AI data centers, graphics processing unit cloud services and enterprise AI transformation, as AI competition intensifies.
As average revenue per user reaches a plateau and traditional mobile businesses slow, carriers are accelerating investments in AI data centers and enterprise AI services to build new growth engines.
"As demand for AI computing increases, telecom data centers are upgrading from traditional space and network leasing to AI data centers,” Lee said.
“Expanding GPU-as-a-Service and design-build-operate businesses will improve data center profitability and allow operators to benefit more from the growth of the AI market."