SK Telecom, KT and LG Uplus, the three telecom companies, are expected to recover profitability in the second quarter to the level before the hacking incident this year. It is due to lower operating expense from reduced capital expenditure (Capex) and lower marketing expense. It is the result of tightening their belts.
On the 7th, according to financial data firm FnGuide, the three telecom companies' combined second-quarter revenue consensus (the average of securities firms' forecasts) came to 15.2052 trillion won, and the operating profit consensus to 1.4492 trillion won.
Compared with the same period a year earlier, revenue is down 2.6% and operating profit is down 12.6%, but considering that KT booked a one-off real estate pre-sale gain from developing the Gangbuk Regional Headquarters site in the second quarter last year, it is actually a growth trend. Even compared with the second quarter of 2024 before the hacking incident (revenue 14.462 trillion won, operating profit 1.286 trillion won), it is an improvement. The industry is shaking off the shock of the hacking incident that rattled telecom companies last year and is regaining profitability.
By company, SK Telecom's second-quarter revenue consensus is 4.4066 trillion won, and its operating profit consensus is 528 billion won. SK Telecom faced a suspension of new sales and subscriber churn due to the hacking incident in Apr. last year, and spent about 200 billion won in expense to replace SIM cards for all subscribers. In the second quarter this year, operating profit is expected to rise on a base effect. The 500 billion won "customer appreciation package" prepared to retain customers seeking to leave due to the hacking incident also ended last year, highlighting the impact of expense savings.
SK Telecom's capital expenditure is also on a downward trend. It spent 2.92 trillion won on a separate basis in 2019, when investment to expand 5G (fifth-generation mobile networks) was in full swing, but only 1.224 trillion won last year. On a separate basis, the share of capital expenditure and marketing expense in SK Telecom's revenue gradually fell from 52% in 2019 to the 30% range last year, and capital expenditure expense is expected to decrease year over year in the second quarter this year as well.
Lee Dayeon, a researcher at Daol Investment & Securities, said, "SK Telecom is continuing its expense-efficiency trajectory thanks to easing marketing competition and limited follow-up investment in 5G," and noted, "Last year, considerable direct and indirect expense occurred due to the hacking incident, damaging profitability, but this year it is expected to return to a normal level."
KT's second-quarter revenue consensus is 6.8864 trillion won, and its operating profit consensus is about 609 billion won. That contrasts with the first-ever 1 trillion won quarterly operating profit of 1.0148 trillion won in the second quarter last year. In the second quarter last year, KT subsidiary KT Estate recorded 390 billion won in operating profit by pre-selling the Gangbuk Regional Headquarters site as the East Pole Apartments in Gwangjin District, but this year, with such one-off factors gone, operating profit has retreated.
KT is currently running a "customer reward program" as a compensation plan for the hacking incident, but it recognized all of this expense last year, easing the operating expense burden in the second quarter this year. Daol Investment & Securities projected KT's operating expense in the second quarter this year at 6.296 trillion won, down from 6.413 trillion won a year earlier. Kim Hoe-jae, a researcher at Daishin Securities, said, "Of the expense pre-booked in the fourth quarter last year related to the hacking incident, the unspent amount could be reversed at the end of 2026 or during 2027," adding, "Operating profit could be raised by about 100 billion won."
KT's capital expenditure is also on a downward trend, with KT's capex on a separate basis falling from 3.2568 trillion won in 2019 to 2.1439 trillion won last year. Capital expenditure is divided into depreciation expense over several years and reflected in operating expense, and because capex has been declining for years, there is an effect of lower operating expense.
LG Uplus's second-quarter revenue consensus is 3.9122 trillion won, and its operating profit consensus is 312.2 billion won. Following the first-ever quarterly operating profit of 300 billion won in the second quarter last year, strong results are expected again this year. This stems from aggressively attracting subscribers while SK Telecom and KT were waiving penalties. Kim Jang-won, a researcher at BNK Investment & Securities, said, "The leakage of subscriber information at the two rivals led to subscriber churn, creating a market that could not have been better for LG Uplus."
In addition, at LG Uplus, the share of capital expenditure and marketing expense in revenue on a separate basis fell from about 40% in 2019 to the 20% range last year. In addition, LG Uplus implemented a voluntary retirement program from the end of Jul. last year. Lee Dayeon, a researcher at Daol Investment & Securities, said, "LG Uplus has continued its expense-efficiency efforts by winding down low-margin new businesses, reallocating personnel and implementing voluntary retirement, and the effect was already evident in last year's results," adding, "LG Uplus's operating profit this year will increase 12.6% from a year earlier to around 1 trillion won."