SK Telecom, KT, and LG Uplus are likely to announce varied earnings for the second quarter, influenced by differing cost frameworks and unique circumstances, as they prepare for a larger focus on artificial intelligence (AI) investments in the latter half of the year.
SK Telecom is projected to experience a significant recovery from the impact of last year's hacking incident, while LG Uplus is anticipated to show steady growth, and KT is likely to witness a drop in earnings due to ongoing cost pressures.
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Based on consensus predictions gathered by FnGuide, the three telecommunications firms are anticipated to report total revenue of 15.2 trillion won ($10.1 billion) and operating income of 1.45 trillion won for the second quarter.
Revenue is projected to increase by 2.6 percent year-on-year, whereas operating profit is anticipated to fall by 12.7 percent, primarily due to poorer results at KT.
SK Telecom is expected to see a significant recovery in operating profit. The projected revenue for the second quarter is 4.41 trillion won, with operating profit reaching 527.9 billion won, an increase of approximately 56 percent compared to the same period last year.
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The enhancement primarily indicates the lack of exceptional expenses related to last year’s universal subscriber identity module (USIM) hacking event, encompassing subscriber attrition, SIM swaps, and customer reimbursements.
LG Uplus is anticipated to ensure consistent earnings, backed by reduced labor expenses due to voluntary retirement initiatives, steady operational costs, and ongoing growth in subscribers. The consensus in the market suggests second-quarter revenue will reach 3.91 trillion won, with an operating profit of 312.2 billion won.
KT, on the other hand, is anticipated to be the sole major carrier to disclose declining profitability, with an estimated 40 percent reduction year-over-year in operating profit to roughly 609 billion won in the second quarter. Its earnings are estimated to be 6.89 trillion won.
The drop is primarily attributed to last year's high base effect, when its subsidiary KT Estate recorded substantial one-time earnings from a large property development initiative. Increased strain from customer compensation initiatives launched earlier this year, along with escalating operating expenses, is anticipated to impact margins negatively.
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Earnings from the second quarter are considered an important indicator of telecom operators' financial capacity to invest in capital-heavy AI projects, such as AI data centers, GPU cloud services, and enterprise AI transformation, especially as competition in AI escalates.
With average revenue per user stabilizing and conventional mobile markets decelerating, carriers are ramping up investments in AI data centers and enterprise AI offerings to create new avenues for growth.
"As demand for AI computing increases, telecom data centers are upgrading from traditional space and network leasing to AI data centers,” Lee said.
“Expanding GPU-as-a-Service and design-build-operate businesses will improve data center profitability and allow operators to benefit more from the growth of the AI market."