Major telecoms to see split earnings in Q1 as cyberattack fallout lingers

Phones are displayed at a retail store in Seoul, Jan. 25, 2022. Newsis

The nation's three major telecom operators — SK Telecom, KT and LG Uplus — are expected to post diverging earnings for this year’s first quarter, as the financial fallout from last year’s high-profile security breaches continues to weigh on the industry.

While SK Telecom and KT are bracing for weaker profitability, LG Uplus is expected to extend its earnings growth supported by subscriber gains and a relatively limited direct impact.

According to consensus forecasts compiled by market researcher FnGuide, the three carriers' combined operating profit is projected at 1.35 trillion won ($896.5 million) for the first quarter, down 10.8 percent from a year earlier.

The decline reflects mounting costs for customer compensation, security upgrades and heavier marketing outlays after a series of cybersecurity incidents at SK Telecom in April and KT in August.

SK Telecom is expected to post the steepest decline among the three, as the full impact of last year’s massive universal subscriber identity module (USIM) data breach continues to show up in its results.

The company’s operating profit is forecast to fall 10.7 percent year-on-year to 506.9 billion won with revenue of 4.40 trillion won, down 1.2 percent.

Following the breach, which exposed over 26 million sets of subscriber identifiers, it rolled out large-scale compensation measures and pledged to invest 700 billion won over five years to upgrade its cybersecurity systems.

From left, SK Telecom CEO Jung Jai-hun, KT CEO Park Yoon-young and LG Uplus CEO Hong Bum-shik / Courtesy of SK Telecom, KT and LG Uplus

KT is also bracing for a sharp earnings drop. Its operating profit is estimated to fall 18.7 percent to 560.5 billion won, hit by the aftermath of a separate data breach involving unauthorized micropayments. Its revenue is projected at around 6.82 trillion won, slipping 0.4 percent year-on-year.

Its early termination fee waiver program for all customers earlier this year significantly inflated marketing and subscriber retention costs, while additional uncertainty remains over potential regulatory fines, which could weigh further on profitability in the coming quarters.

The company vowed to spend at least 1 trillion won over the next five years to completely overhaul its security architecture, and has launched a dedicated cybersecurity task force.

In contrast, LG Uplus is expected to stand out as the only carrier among the three to post growth, as it capitalizes on its competitors' stumbles. Its operating profit is projected to rise 10.2 percent year-on-year to about 281.4 billion won, with revenue up 1.6 percent to 3.86 trillion won.

The underdog telecom firm has been the main beneficiary of subscriber churn triggered by SK Telecom and KT’s cybersecurity incidents, helping lift its market share to 19.6 percent as of late January.

However, the second quarter is unlikely to offer much relief, especially with LG Uplus now facing its own scrutiny over long‑standing international mobile subscriber identity generation practices that include users’ phone numbers. It will begin free SIM card replacements for all customers on Friday.

The move is expected to add to costs and heighten concerns about temporary gaps in user protection.

Meanwhile, rising energy costs due to geopolitical conflicts are also seen as a key headwind for the three carriers’ energy-intensive artificial intelligence (AI) data center businesses.