LG Uplus said operating profit rose 6.6% from a year earlier in the first quarter as its AI data center (DC) business grew sharply. A windfall from KT's penalty waiver also had a positive impact on results.
LG Uplus disclosed on the 7th that first-quarter revenue came to 3.8037 trillion won and operating profit to 272.3 billion won, up 1.5% and 6.6%, respectively, from a year earlier. Net profit for the period rose 8.4% to 176 billion won.
Operating revenue and service revenue each increased 1.5% and 3.3% year over year in the first quarter. The operating margin was 9.0%, extending the improvement from last year. The first-quarter net margin was 4.6%, up 0.3 percentage points from a year earlier. Earnings before interest, taxes, depreciation and amortization (EBITDA), an indicator of a corporations' real cash generation capacity, rose 4.1% from a year earlier to 958.8 billion won in the first quarter. The EBITDA margin was 31.6%.
The company said the improvement in operating profit was due to "profitability efforts centered on return on investment (ROI), such as expense efficiency and business portfolio stabilization."
First-quarter results were slightly below securities market analysts' expectations. According to FnGuide, analysts expected LG Uplus to post first-quarter revenue of 3.8637 trillion won, up 3.09% from a year earlier. Operating profit for the period was forecast at 281.2 billion won, up 10.07% on-year, and net profit at 187 billion won, up 15.09% on-year.
All business areas, including corporate infrastructure, mobile, and smart home, grew evenly.
In particular, the AIDC business in corporate infrastructure grew significantly. The AIDC business, boosted by higher DBO (design, build, operate) revenue on top of existing colocation, rose 31% year over year in the first quarter to 114.4 billion won, driving growth in the corporate infrastructure institutional sector. Revenue in the corporate infrastructure institutional sector, which includes LG Uplus' AIDC, solutions, and corporate lines, was 435.6 billion won in the first quarter, up 6.3% from a year earlier. Solution revenue was 117.9 billion won, down a slight 0.8% on-year, while corporate line revenue fell 0.1% to 203.3 billion won over the same period.
Total revenue in LG Uplus' mobile institutional sector was 1.6526 trillion won in the first quarter, up 3.2% from a year earlier. Excluding access revenue, mobile service revenue was 1.5878 trillion won, up 3.7% from a year earlier. Total mobile subscribed lines were about 30.931 million, up 6.4% from a year earlier, with a net addition of 220,000 lines during the first quarter. Mobile network operator (MNO) subscribed lines were about 21.967 million, and mobile virtual network operator (MVNO) subscribed lines were about 8.964 million, up 7.1% and 4.7%, respectively, from a year earlier. 5G (fifth-generation mobile network) handset subscribers rose 11% on-year to 9.473 million, and the 5G penetration rate among all handset subscribers expanded to 84.2%. There was also a tailwind after KT waived penalties in January due to hacking fallout. "Average revenue per user (ARPU) for MNO services," excluding Internet of Things (IoT) lines and MVNO lines, was 35,646 won, a slight 0.3% increase on-year.
LG Uplus' AIDC business is diversifying its business scope and revenue structure by expanding in earnest into DBO operations, moving away from a colocation-centered model. LG Uplus said, "Based on the solid growth trajectory of the AIDC business, we will accelerate the DBO business while expanding mid- to long-term new growth opportunities by developing AI-based new businesses."
Smart home institutional sector revenue, made up of IPTV and internet businesses, rose 4.1% year over year to 656.3 billion won in the first quarter, helped by growth in giga internet subscribers. Internet revenue in the first quarter was 320 billion won, up 7.9% from a year earlier. Internet subscribers recorded a net increase of 62,000 in the quarter, rising 4.5% on-year to 5.64 million. IPTV revenue rose 1.5% on-year to 335.1 billion won. IPTV subscribers totaled 5.767 million, up 2.8% from a year earlier.
In the first quarter, LG Uplus improved IPTV convenience and usage for middle-aged and older customers, who have relatively lower access to AI, through the "AI shortcut" service that expanded the use of Generative AI in IPTV to TVs. The company said, "We will continue to expand our base of high-value subscribers while steadily enhancing mid- to long-term cost competitiveness by improving the expense structure."
Yeo Myeong-hee, LG Uplus chief financial officer (CFO) and chief risk officer (CRO), said, "LG Uplus is making the reinforcement of profitability in its core telecommunications business a key task, and aims to establish a stable revenue structure by systematically securing competitiveness in the AX (AI transformation) business," adding, "By consistently pursuing this strategic direction, we will accelerate mid- to long-term growth and continuously enhance corporate value."
At the earnings conference call that day, LG Uplus said, "We are building the Paju AIDC by concentrating the capabilities and synergies of LG Group in the AIDC business," adding, "Based on strong AI infrastructure competitiveness, we will achieve visible sales growth in AICC and AIDC."
Meanwhile, to enhance shareholder value, LG Uplus decided to cancel all of its treasury shares worth about 80 billion won (book value) that it has been buying since last year on May 15. In August last year, LG Uplus also canceled treasury shares worth about 100 billion won on a book-value basis, and it plans to continue activities to enhance shareholder value and strengthen shareholder confidence in line with the corporate value enhancement plan "Value-up Plan" released in Nov. 2024.