As the telecommunications industry approaches the announcement of second-quarter results in early August, the three mobile carriers are expected to receive mixed performance reports. While KT and LG Uplus are expected to benefit from the residual profits stemming from the SK Telecom (SKT) hacking incident that occurred in April, SKT is facing inevitable impacts on its results due to subscriber churn and expenditures related to the replacement of subscriber identification devices (USIM).
◇ Second-quarter strong performance for KT and LG Uplus... SKT expected to see a 36% decline in operating profit
According to industry and investment sources on the 28th, SKT, KT, and LG Uplus are expected to announce their second-quarter results between early and mid-August. The industry anticipates that all three firms will report their results on either August 8 or 11.
KT and LG Uplus are expected to report strong results for the second quarter. According to DB Financial Investment, KT's second-quarter revenue is expected to increase by 12.8% year-on-year to 7.383 trillion won, and operating profit is projected to surge by 87.7% to 927.4 billion won. It is expected that over half of the development project sales revenue from its affiliate in Seoul's Gwangjin District, amounting to about 300 billion won, will have a positive impact this quarter.
Eugene Securities forecasts that LG Uplus's second-quarter revenue will reach 3.5856 trillion won, marking a 3.3% increase compared to the same period last year, while operating profit is expected to grow by 9.7% to 278.7 billion won.
In contrast to the two companies, SKT is expected to see deteriorating performance. DB Financial Investment estimates that SKT's second-quarter revenue will decrease by 1.7% year-on-year to 4.3464 trillion won, and operating profit will decline by 43.4% to 304.4 billion won. In terms of revenue, the company is expected to maintain similar levels to last year as it increases the operational rate of its artificial intelligence data center (AIDC).
◇ Increased expenditure for SKT due to hacking incident… "annual results also expected to decline"
Industry experts believe that the hacking incident at SKT in April affected the performance of the three mobile carriers. The primary reasons for SKT's poor performance are analyzed to be increased expenses due to large-scale USIM replacements and subscriber churn. SKT had supported free USIM replacements for about 23 million customers immediately after the hacking incident. The industry estimated that the total cost for USIM alone would reach around 150 billion won to 200 billion won, based on a unit price of 7,700 won per USIM.
The hacking incident also disrupted SKT's maintained 40% market share. According to the Ministry of Science and ICT's 'Wireless Communication Service Subscriber Statistics', as of May, SKT's subscriber count (excluding other lines) stood at 22,138,806, accounting for 39.2% of the total mobile subscribers. This reflects a drop of 0.79 percentage points compared to April's figure of 40.08%. It is the first time SK Telecom's market share has fallen below 40%.
As SKT users have largely departed, its competitors have reportedly increased their market shares. As of May, KT held 23.77% (13,610,780 users) and LG Uplus 19.45% (11,131,466 users), marking an increase of 0.32 and 0.23 percentage points, respectively, compared to the previous month. Over the past two months, KT gained 280,000 subscribers, while LG Uplus gained 240,000.
For SKT, the outlook for annual operating profit has also darkened. SKT announced plans to offer 50% discounts on mobile phone bills for the remaining customers in August as part of its compensation plan, along with providing an additional 50 GB of data to all customers each month until the end of the year. The discount percentage for membership partner companies has also increased to a maximum of 60%.
Kim Hong-sik, a researcher at Hana Financial Investment, noted, "The decrease in SKT's annual operating profit due to the recent USIM hacking incident is projected to be 50 billion won," considering the drop in mobile revenues due to discounts and the expansion of free data provision, as well as expenses related to USIM replacements, membership discounts, penalty surcharges, and waiver of penalties.