'Untact Boom' LG Uplus Reports Q3 Earnings Surprise (Comprehensive)

원본보기 아이콘

[Asia Economy Reporter Koo Chae-eun] LG Uplus posted an 'earnings surprise' in the third quarter with an operating profit of 251.2 billion KRW (consolidated basis), up 60.6% from a year earlier. The IPTV and high-speed internet sectors performed well due to increased traffic demand caused by the spread of COVID-19, and although 5G subscribers increased, marketing costs were kept under control due to the rise in stay-at-home consumers.

On the 5th, LG Uplus announced third-quarter results with sales of 3.341 trillion KRW and operating profit of 251.2 billion KRW, up 5.9% and 60.6% respectively from the previous year. The increase in 5G subscribers, balanced growth in mobile and smart home (IPTV, high-speed internet) wired and wireless sectors, and efficient cost execution were key factors. The spread of untact culture due to COVID-19 led to increased mobile data demand and expansion of media demand such as IPTV, reflecting in these results.

Service revenue, which refers to subscriber-based fee revenue, rose 14.4% year-on-year to 2.65 trillion KRW. The operating profit margin relative to service revenue also increased by 2.7 percentage points year-on-year to 9.5%. Mobile service revenue grew 5.4% year-on-year to 1.3816 trillion KRW due to increases in new and net subscribers. Notably, net mobile subscribers reached a quarterly record high of 406,000, bringing the total mobile subscribers to 16.265 million, an 8.7% increase from the previous year. 5G subscribers accounted for 19.2% of total subscribers (handset basis), reaching 2.173 million.

LG Uplus attributes mobile revenue growth to its appropriate response to the untact telecommunications market. The company significantly revamped the non-face-to-face purchase process from phone purchase to activation, promoting innovation in online channel customer experience. Examples include self-activation through ‘U+Shop Live’ and ‘U+ Kiosk,’ and ‘home delivery’ services. Additionally, LG Uplus strengthened content for 5G core services such as Idol Live, professional baseball, and cloud gaming, and continued efforts to innovate 5G customer experience by commercializing AR glasses for the first time in the world.

The MVNO (Mobile Virtual Network Operator) business drove mobile revenue growth with a 41.6% year-on-year increase in subscribers due to increased self-activation. With the continuous rise in 5G subscribers and MVNO subscribers, mobile services recorded a 5.5% growth on a cumulative third-quarter basis, exceeding the annual growth target of 5%. Smart home revenue reached 514.3 billion KRW, up 12.5% year-on-year, maintaining double-digit growth.

원본보기 아이콘

IPTV recorded 292.6 billion KRW, a 13.2% increase year-on-year, driven by growth in basic fees, VOD demand, and advertising revenue. IPTV revenue is expected to exceed 1 trillion KRW again this year, with a cumulative 854.2 billion KRW recorded through the third quarter. High-speed internet grew 11.6% year-on-year to 221.7 billion KRW due to the spread of smart plans and an increase in gigabit internet subscribers. The enterprise infrastructure sector recorded 334 billion KRW, up 2.7% year-on-year, driven by increased cloud demand.

The enterprise infrastructure business focused on expanding 5G-based B2B service areas. It introduced a ‘5G autonomous driving robot’ that patrols and inspects key equipment within large factories using 5G and high-precision positioning technology. For logistics center operation automation, it is promoting a 5G low-latency technology-based unmanned forklift business and is conducting demonstrations within the year.

Marketing expenses in the third quarter amounted to 581.2 billion KRW. Although this was a 4.4% increase from the previous quarter due to increased sales from flagship smartphone launches, overall it remained stable and decreased 0.7% year-on-year. Despite sales growth factors from the iPhone 12 launch in the fourth quarter, the company plans to maintain a stable cost execution stance. Capital expenditures (CAPEX) totaled 596.3 billion KRW, reaching 1.5961 trillion KRW cumulatively, about 64% of this year’s guidance of 2.5 trillion KRW.

Meanwhile, in the fourth quarter, LG Uplus will focus on fostering the related ecosystem by strengthening cooperation with manufacturers such as Qualcomm and expanding AR/VR content supply through the XR Alliance, where it serves as chair company with participation from major global telecom operators. Marketing expenses related to the iPhone 12 launch will also be managed with a stable approach. The company plans to expand new businesses such as convergence business and smart factories. Lee Hyuk-joo, LG Uplus Vice President and Chief Financial Officer (CFO), stated, "We will continue additional growth in consumer and enterprise businesses in the fourth quarter, focus on improving profitability, and do our best to enhance market and shareholder value. We will concentrate on growing our core telecommunications business while expanding the foundation for future growth."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.