[Weekend Money] Which Telecom Stock Has the Highest Investment Appeal for June?

Hana Securities has maintained its investment attractiveness rating for the telecommunications services sector at "High" for June and, in the short term, presented the order of investment appeal for individual stocks within the sector as SK Telecom > LG Uplus > KT.

Hongshik Kim, an analyst at Hana Securities, explained, "The reason we expect the telecommunications services sector to remain highly attractive in June is that, considering the recent intensity of marketing competition, both SK Telecom and LG Uplus—excluding KT—are projected to see an increase in consolidated operating profit in the second quarter of this year, not only year-on-year but also quarter-on-quarter. In addition, following SK Telecom, expectations for a long-term increase in shareholder returns are likely to spread to LG Uplus as well."

Hana Securities has selected SK Telecom as its top pick in the telecommunications services sector for June. Kim stated, "When considering earnings, dividends, and artificial intelligence (AI) issues, SK Telecom is the only one among the three companies with active catalysts, and given its growth potential, the expected dividend yield gap with competitors is minimal. We see SK Telecom as highly attractive not only for short-term but also for long-term investment. Due to the base effect, operating results for the second and third quarters are expected to be solid, and in areas such as AI RAN, physical AI, and quantum cryptography communications, SK Telecom is likely to show the closest relevance among the three companies." He added, "The high likelihood of being selected as a national AI operator also raises expectations for a short-term share price increase."

Second-quarter results for the telecom companies are expected to be solid. Kim explained, "Although the growth rate is slowing, mobile service revenue continues to rise, and there is a trend of labor costs stabilizing downward. Marketing and depreciation costs are also showing signs of stagnation, so overall, the profit growth trend driven by cost stabilization is expected to continue."

An increase in long-term shareholder returns is also anticipated. SK Telecom has already paid a dividend of 830 won per share in the first quarter, and with tax-free dividends scheduled in the fourth quarter, further dividend increases are expected. In addition, LG Uplus is likely to provide guidance on share buybacks for this year and share cancellations for next year around the time of its second-quarter earnings announcement. Kim said, "With SK Telecom's dividends already normalized and expectations for tax-free dividends rising, anticipation for a long-term increase in shareholder returns at LG Uplus is also expected to grow."

While there are not many issues in the telecommunications services sector in June, several points are expected to draw investor attention: the U.S. 5G frequency auction; the introduction plan for AI RAN to promote physical AI in Korea; a possible spread of buying interest in telecom service stocks due to surges in U.S. and Korean telecom equipment stocks; the launch of an AI token plan in China; and a potential improvement in second-quarter results for SK Telecom and LG Uplus. Kim analyzed, "Overall, despite the limited number of sector issues, the global expansion of standalone 5G (SA) adoption and the potential activation of physical AI will affect investor sentiment and determine the share prices of the three telecom companies. The U.S. spectrum auction and the expansion of 5G SA adoption are expected to have a positive impact on domestic telecom stocks, possibly leading to multiple expansion among the three domestic telecom companies and a downward trend in the dividend yield band."

This content was produced with the assistance of AI translation services.