"5G (fifth generation mobile communication) investment is nearly finished. Investment in 6G is a matter for the distant future."
KT said on the 13th during its 2024 fourth-quarter earnings conference call. While the telecommunications industry is passive in investing in its core business of telecommunications networks, it is focusing on shareholder return policies such as expanding dividends and improving performance through workforce reductions. Interest in telecommunications stocks, which are sheltered from President Donald Trump's tariff policy, has increased, but concerns are also growing about the weakening growth momentum of telecom companies that have neglected their core business investments.
According to the telecommunications industry on the 16th, more than 40% of the total annual operating profit of the three telecommunications companies last year was allocated to dividends. The total dividends allocated by SK Telecom, KT, and LG Uplus for the 2024 settlement of account amount to 1.5245 trillion won, which is about 43% of last year's combined annual operating profit of the three companies (3.4944 trillion won). Compared to the previous year, the proportion of dividends in the operating profit of the three telecommunications companies increased by 9 percentage points.
Specifically, dividends were spent the most by SK Telecom (753.6 billion won), followed by KT (491.5 billion won) and LG Uplus (279.4 billion won). Although the combined annual operating profit of the three telecommunications companies in 2024 is expected to decrease by about 20% compared to 2023, the total amount of dividends has remained at a similar level. A source in the telecommunications industry noted, "Although operating profit has decreased, we have not reduced dividends and matched them to the 2023 level," adding that it insists on a shareholder return policy that continues to maintain high levels of dividends instead of reducing investments in telecommunications operations.
Stock buybacks are also a recent focus of telecommunications companies in terms of shareholder returns. KT is the most active telecommunications company in stock buybacks. KT announced on the 13th that it would buy back shares worth 250 billion won. This marks part of a plan for 1 trillion won in stock buybacks by 2028. SK Telecom had previously bought back shares worth 200 billion won last February.
Telecommunications companies are actively expanding shareholder dividends and stock buybacks to boost their stock prices through value enhancement. Over the past year, the stock price trends of the three telecommunications companies from Feb. 14, 2024, to Feb. 14, 2025, show that KT recorded the highest increase at 24%. It was followed by SK Telecom (9.3%) and LG Uplus (6%). The main reason for KT's significant stock price increase is the expectation of reduced labor costs due to substantial workforce reductions of up to 4,400 people by the end of last year. It is reported that about 300 billion won in annual labor costs will decrease from this year.
In addition, it is expected that Trump's favorable policies will also play a role in efforts to boost telecommunications companies' stock prices through value enhancement. Recently, due to President Trump's strengthened tariff policies, the advantages for telecommunications stocks, which are domestic consumption stocks and defensive stocks unrelated to tariffs, have increased.
However, there is a perspective that such favorable wind will not last long. It is argued that telecommunications companies are focusing only on short-term momentum to boost stock prices (such as expanding dividends, stock buybacks, and workforce reductions) without increasing investments in their core telecommunications business.
According to the business reports of each company, the three telecommunications companies have been found to reduce investments in telecommunications network facilities. From the first to the third quarter of last year, SK Telecom's capital expenditure (CAPEX) amounted to 1.166 trillion won, a decrease of 21.5% compared to the same period last year. During the same period, KT's capital expenditure amounted to 1.416 trillion won, down 11.5% from the previous year, while LG Uplus recorded 1.3904 trillion won, an 18.4% decrease compared to the previous year. All three telecommunications companies have announced plans to fully launch artificial intelligence (AI) businesses and increase investments in them this year, so the trend of reducing telecommunications network facility investments is expected to deepen further.
Strong Han, CEO of Escotos Consulting, noted, "Domestic telecommunications market competition for securing users has disappeared, so there is little need for telecommunications network investments," adding, "It seems they have determined that it is advantageous for telecommunications companies to launch services that expand user experiences using AI and generate new revenue."
Ryu Jong-ki, an expert in corporate risk and executive at Han Young EY, pointed out, "The greatest issue in corporate management is to focus on short-term momentum and short-term performance for boosting stock prices without increasing research and development (R&D) or investments to strengthen core business competitiveness from a long-term perspective." He added, "Companies that delay equipment investment and give up enhancing consumer benefits are bound to face greater growth risks."
Among the three telecommunications companies, only LG Uplus disclosed the amount of its 5G investment. On the 6th, during its 2024 fourth-quarter earnings conference call, LG Uplus stated, "Large-scale investment in 5G has decreased until last year. We spent about 2 trillion won last year," and added, "Investment levels will remain similar in the coming years until 6G arrives."
As of December last year, the cash assets (including short-term financial products) of the three telecommunications companies were: SK Telecom 2.3476 trillion won, KT 3.7295 trillion won, and LG Uplus 965.3 billion won.