From
Send to

Telecom carriers to see drop in revenue

Dec. 13, 2015 - 18:24 By Korea Herald
South Korea’s big three telecom carriers ― SK Telecom, KT and LG Uplus ― are expected to see an unprecedented drop in their combined revenue this year amid rapid market saturation.

According to market analyst FnGuide, their combined revenue is set to fall to 49.6 trillion won ($42 billion) this year, about 4 percent down from last year’s 51.5 trillion won. 

The logos of SK Telecom, KT and LG Uplus are seen at an electronics shop in Seoul. Yonhap

KT would see the largest drop to 21.8 trillion won from 23.4 trillion won, while SK Telecom expects a fall to 17.1 trillion won from 17.8 trillion won. The smallest of the three major telecoms, LG Uplus’ revenue is expected to decline to 10.6 trillion won from 10.9 trillion won.

The three companies have long dominated the nation’s telecom market, competing fiercely to gobble up each other’s shares. But an unprecedented drop in their total revenue is signaling that the market as a whole is fast saturating.

Especially their flagship mobile service business expects no immediate breakthrough, hit hard by the government’s subsidy limits that took effect last year to reform an overheated device market.

As of October, the number of mobile subscribers reached 58.6 million, already exceeding the nation’s total population of about 50 million.

They are pinning high hopes on the next-generation 5G service, but its commercialization is expected to come in 2020. Their new growth engine businesses, such as the Internet of Things services, are still in their infancy.

SK Telecom’s planned acquisition of CJ Hellovision, the nation’s top cable TV operator, also comes as the companies are scrambling to find new profit sources.

Despite resistance from its rivals, SK Telecom plans to push ahead with the acquisition plan with aims to transform into a media content platform company. KT and LG Uplus have opposed the plan, citing monopoly concerns.

If the plan is approved by the regulatory authorities, it would pose a direct threat to KT, the No. 1 cable TV operator with 8.4 million subscribers. SK Broadband, the Internet protocol TV unit of SK, and CJ Hellovision have 3.3 million and 4.2 million subscribers, respectively.

Industry watchers expect the combined operating profits of SK Broadband and CJ Hellovision to surge from the current 185 billion won to 300 billion won.

“With the planned acquisition, SK Telecom has secured a strong growth momentum,” said Kim Hoe-jae, an analyst at Daishin Securities.

SK Telecom CEO Jang Dong-hyun also called the acquisition a crucial decision for the company’s survival in his recent meeting with reporters.

“SK Telecom’s acquisition of CJ Hellovision and the rivals’ resistance all come as part of their desperate efforts for survival,” said an industry source. “The regulatory authorities should consider diverse aspects before their final decision.”

The Ministry of Science, ICT and Future Planning and the Fair Trade Commission have recently started reviewing the acquisition plan and plan to complete the process by February next year.

By Lee Ji-yoon (jylee@heraldcorp.com)