Telecom earnings top 4tn won despite cybersecurity setbacks

(Yonhap)

South Korea’s major mobile carriers are expected to recover combined annual operating profit above 4 trillion won ($2.72 billion) despite a series of cybersecurity incidents last year, though performance diverged sharply among the three companies.

According to FnGuide on Monday, combined revenue for SK telecom, KT and LG Uplus last year is estimated at 60.91 trillion won, with aggregate operating profit reaching 4.38 trillion won. Compared with the previous year, revenue rose 3.25 percent and operating profit increased 25.4 percent, marking the first time since 2023 that sector-wide operating profit exceeded 4 trillion won.

SK telecom is forecast to post revenue of 17.15 trillion won and operating profit of 1.05 trillion won, down 4.39 percent and 42.04 percent, respectively, from a year earlier. KT is expected to record revenue of 28.24 trillion won and operating profit of 2.42 trillion won, up 6.86 percent and 199.53 percent, while LG Uplus is projected to generate revenue of 15.51 trillion won and operating profit of 901.5 billion won, increases of 6.11 percent and 4.46 percent.

SK telecom was hit hardest after a SIM card hacking and data breach incident in April last year, prompting the company to offer free SIM replacements, waive contract termination fees and provide one-off fee discounts. Marketing spending also rose significantly as the carrier sought to win back departing subscribers.

KT, by contrast, showed improved performance, supported by sales from real estate subsidiaries and land development projects, alongside expanding public-sector contracts tied to its artificial intelligence transformation strategy. This year, however, is expected to be more challenging, as one-off costs related to cybersecurity incidents are set to be reflected in earnings.

LG Uplus benefited from absorbing subscriber outflows from rivals as they focused on addressing hacking fallout. Solid performance across business units and cost-efficiency efforts have raised expectations that the company could surpass 1 trillion won in operating profit. LG Uplus has designated this year as the starting point for executing its AI strategy.

Choi Yoo-jin, a research analyst at Mirae Asset Securities, said that after passing a quarterly earnings trough in the fourth quarter, profitability is likely to improve meaningfully from the first quarter of this year, as previously invested AI-related businesses begin full-scale operations and portfolio optimization advances through the sale of non-core assets.

While growth in traditional wired and wireless services remains limited, new AI-driven businesses are expected to lift sentiment across the telecom sector, particularly AI data centers, which are emerging as a medium- to long-term growth engine.

SK telecom has reorganized its group structure around telecom and AI businesses and is building infrastructure for an AI data center in Ulsan, targeting operations by 2027 and AI-related revenue of 5 trillion won by 2030.

KT plans to complete a 48-megawatt AI data center in Bucheon within the year, while LG Uplus is constructing a 50-megawatt facility in Paju.

Ahn Jae-min, a senior analyst at NH Investment & Securities, said combined revenue from telecom operators’ data center businesses is expected to reach 1.55 trillion won this year and grow at an average annual rate of around 19 percent to 2.46 trillion won by 2028.