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SK Telecom, KT and LG Uplus are expected to post disappointing earnings for the April-June period despite the launch of the world's first fifth-generation (5G) network service in early April, according to industry analysts Wednesday.
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| SK Telecom CEO Park Jung-ho |
Analysts said the three mobile carriers are projected to suffer a 7 percent to 19 percent drop in operating profits in the second quarter from a year earlier, due to more-than-expected equipment investment and marketing expenses amid intense competition to attract 5G subscribers.
Analysts noted, however, that the performance of the three telecom companies is expected to turn around in the third quarter, citing that the number of 5G subscribers who use expensive 5G monthly fees has continued to increase.
The aggregate operating profit of the three for the second quarter has been forecast to be about 800 billion won ($679 million), down from about 1 trillion won from a year earlier.
LG Uplus is expected to announce the most substandard performance. According to market tracker FnGuide, the telecom firm's operating profit for the second quarter may have been tallied at 170 billion won, down by 19 percent from a year earlier.
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| KT chairman Hwang Chang-gyu |
Analysts said the three telecom companies seem to have increased marketing expenses by about to 4 percent to 10 percent in an effort to dominate the 5G market in advance.
Fierce competition also led the companies to excessively increase their subsidies offered to new subscribers who bought the Samsung Galaxy S10 5G or the LG V50 ThinQ 5G.
SK Telecom, KT and LG Uplus advertised extensively that they offer the largest subsidies to new subscribers based on the notion that the high price of the 5G smartphone was considered a major barrier for the 5G market.
The companies have had to spend a lot as well in constructing 5G networks nationwide.
Analysts said investors need to focus on the third-quarter performance of the mobile carriers as it is expected to bounce back.
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| LG Uplus CEO Ha Hyun-hwoi |
ARPU, which stands for average revenue per user, is a representative profitability figure.
Hana Financial Investment analyst Kim Hong-sik said the number of 5G subscribers has reached more than 500,000 in June and is expected to reach 2 million in August.
"The figure is expected to increase further to 5 million after Galaxy Note 10 and other 5G smartphones are released," he said.
