SK Telecom, KT, and LG Uplus reported a combined operating loss in the fourth quarter of last year due to the reflection of KT's large-scale restructuring expense costs. As a result, the combined annual operating profit of the three mobile carriers plummeted to the 3 trillion won range, making the goal of achieving 4 trillion won in operating profit for four consecutive years unattainable. In particular, if the Fair Trade Commission's penalty surcharge imposed due to allegations of collusion on sales incentives (rebates) against the three mobile carriers is confirmed this year, the performance of the three mobile carriers is expected to be negatively affected.
According to each company on the 13th, the combined operating loss of the three telecom companies in the fourth quarter of last year was recorded at 258.8 billion won. The total combined revenue of the three companies amounted to 14.84 trillion won. A temporary increase in labor costs due to restructuring and retirements led to a decrease in operating profit for all three mobile carriers.
According to SK Telecom's consolidated financial statements for the fourth quarter of last year, the operating profit decreased by 14.4% compared to the previous year, amounting to 254.1 billion won. During the same period, revenue fell by 0.35% compared to the previous year, totaling 4.5115 trillion won. SK Telecom explained that the decline in operating profit was attributed to an increase in retirement compensation, resulting in a rise in the number of applicants for retirement. Last year, SK Telecom raised the retirement compensation for its retirement program 'Next Career' from 50 million won to 300 million won.
KT recorded an operating loss of 655.1 billion won in the fourth quarter. KT explained that the shift to an operating loss in the fourth quarter was due to a one-time labor cost of approximately 1 trillion won from the recent large-scale workforce reduction of 4,400 employees. During the same period, revenue decreased by 1.7% compared to the previous year, totaling 6.5756 trillion won. The decrease in fourth-quarter revenue was due to a reduction in unprofitable businesses such as Taeyang, digital logistics, and the metaverse, as well as the poor performance of its subsidiaries KT SkyLife and BC Card.
LG Uplus recorded an operating profit of 142.2 billion won in the fourth quarter of last year, a decrease of 27.3% compared to the previous year. Revenue decreased by 1.8% compared to the previous year, totaling 3.7532 trillion won. LG Uplus stated that the decrease in operating profit was influenced by the amortization costs of intangible assets due to the establishment of a new integrated computer system and the increase in one-time labor costs in the fourth quarter due to a ruling that expanded the scope of ordinary wages. The shift to loss of its subsidiary LG HelloVision also had an impact. In the fourth quarter, LG HelloVision recorded an operating loss of 1.332 billion won.
Due to the poor performance in the fourth quarter, the annual operating profit of the three mobile carriers also decreased compared to the previous year. Last year, the combined annual operating profit of the three mobile carriers was 3.4944 trillion won, a reduction of approximately 20% compared to the previous year (4.4008 trillion won). Specifically, only the operating profit of SK Telecom increased, while that of KT and LG Uplus decreased. SK Telecom's operating profit increased by 4% to 1.8234 trillion won, while the operating profits for KT (809.5 billion won) and LG Uplus (863.1 billion won) decreased by 50.9% and 13.5%, respectively.
This year, the penalty surcharge risk from the Fair Trade Commission is expected to be a variable that weighs on the performance of the three mobile carriers. The Fair Trade Commission has warned the three mobile carriers of a potential penalty surcharge of up to 5.5 trillion won due to allegations of collusion over sales incentives. This amount is about 2 trillion won more than last year's combined annual operating profit of the three carriers. It is anticipated that the decision on the penalty surcharge from the Fair Trade Commission will be made around March during the commission's plenary sessions scheduled for the 19th and 26th.
A source in the telecommunications industry noted, "Although the operating profit of the three mobile carriers declined last year due to retirements, the effect of reduced labor costs will be positively reflected in their performance starting this year." They also mentioned, "However, the Fair Trade Commission's penalty surcharge of around 5 trillion won will be an important variable affecting the performance of the three mobile carriers this year."