Subscribe
E-Paper
SK Telecom, KT and LG Uplus have been forecast to post substandard performances in the fourth quarter of 2018 amid falling profitability in the wireless communications business, according to industry analysts Wednesday.
Among others, a series of new government policies designed to reduce households' telecom-related expenditure adversely affected the bottom line of the three companies, they said.
 |
KB Securities estimated that SK Telecom will post a 268.3 billion won ($238 million) operating profit for the October-December period, while those for KT and LG Uplus will stand at 182.7 billion won and 187.2 billion won, respectively.
The aggregate operating profit of the three was forecast to be 638.2 billion won, below the market consensus of 699.9 billion won.
Government policies, including a 25 percent discount rate for ordinary subscribers, up from the previous 20 percent, were cited as major negative factors for the performance.
Other variables have also affected their falling operating profits ― SK Telecom spent money in acquiring security service provider ADT Caps in October; while KT had to spend on restoration work after a fire at one of its cable tunnels.
The fire broke out Nov. 24 at a facility in Ahyeon-dong, western Seoul, and burned in a 150-meter-long tunnel that housed network cables, until it was extinguished about 10 hours later, causing unprecedented internet and phone disruptions.
"SK Telecom began to add to the costs for its 5G network in December, while expenses to take over ADT Caps are also expected to be reflected in the firm's performance," said KB Securities analyst Kim Joon-seob.
Analysts said the outlook for the mobile carriers will remain gloomy for the time being as they need to continue to invest and spend on marketing costs for 5G network services.
It is unclear whether they will be able to retrieve their investment through higher fees for 5G mobile phone services as the government has asked them to refrain from increasing the price of cell phone plans too much.
"Telecom firms' operating profits in 2019 will remain at an average level due to spending on 5G services," said Angela Hong, an analyst from Nomura Securities. "In particular, LG Uplus seems to be more cautious in spending money related to the launch of 5G services."
Meanwhile, KB Securities analyst Lee Soo-kyung said SK Telecom would be able to enjoy performance improvement of its subsidiary SK Broadband in 2019, saying, "SK Broadband's sales in internet protocol television services and other additional services such as video on demand will increase."
