[DigitalToday reporter Jin-ho Lee] South Korea's three mobile carriers are expected to post divergent second-quarter results this year. SK Telecom and LG Uplus are expected to extend an earnings improvement trend backed by wireless and artificial intelligence (AI) infrastructure businesses. KT is expected to see operating profit fall sharply due to base effects from property gains reflected last year.

As of July 28, financial information provider FnGuide puts market estimates for SKT's second-quarter revenue and operating profit at about 4.41 trillion won and 545.8 billion won, respectively. Revenue is seen edging up from a year earlier, while operating profit is expected to jump more than 60 percent.

SKT and LG Uplus seen improving results; KT slows on base effects from property gains

In particular, operating profit is expected to recover to pre-hacking levels. Profitability worsened after last year's SIM information leak, due to subscriber losses, customer compensation and higher marketing costs, and is seen normalising.

Net additions of wireless subscribers and growth in the AI data centre (AIDC) business are also seen supporting the improvement, the analysis showed. SKT is building an AI data centre in Ulsan with Amazon Web Services (AWS). It is pushing to build a large-scale AI data centre linked to the government's AI infrastructure megaproject, and has also launched a dedicated AI data centre business development subsidiary, SK Hyper.

Yu-jin Choi (최유진), an analyst at Mirae Asset Securities, analysed that given its strength as the only domestic player with an AI full stack and group-level support, building AI data centres can sustain an edge over competitors not only as a long-term growth engine but also in terms of structural change in telecom services.

LG Uplus is forecast to post second-quarter revenue of about 3.90 trillion won and operating profit of about 310.3 billion won. Both figures are slightly higher than a year earlier. The improvement is seen driven by higher service revenue from an increase in wireless subscribers. Efforts to streamline key costs such as marketing and labour expenses also supported profitability improvement.

Growth in its corporate infrastructure business is also expected to pick up pace. LG Uplus is building a 200-megawatt hyperscale AI data centre in Paju, Gyeonggi province, as it pushes to expand its business-to-business (B2B) operations.

Ji-su Jeong (정지수), an analyst at Meritz Securities, forecast that while gigabit internet subscribers are driving the home business, the corporate infrastructure business will grow 31.0 percent from a year earlier, helped by results in designing, building and operating (DBO) data centre operations.

KT, by contrast, is expected to deliver somewhat weak results. KT is forecast to post second-quarter revenue of about 6.83 trillion won and operating profit of about 603.5 billion won. Both revenue and operating profit are expected to fall from a year earlier, with operating profit seen plunging by around 40 percent.

Base effects are large after a sizeable property presales gain was reflected in the second quarter last year from development of a site in northern Seoul. At the time, KT posted operating profit of more than 1 trillion won, its biggest quarterly result since listing.

Some analysis also says growth in telecom service revenue and cost-efficiency results may fall short of market expectations. Additional costs such as possible fines linked to last year's unauthorised small-amount billing incident are also cited as a variable for second-half results.

KT is pinning its hopes on its 'AX company' strategy, which it has been pushing since the appointment of CEO Yun-young Park (박윤영). The plan is to combine data centre, cloud, network and consulting capabilities to expand AX business by industry, including finance, public services and manufacturing.

Hee-cheol Shin (신희철), an analyst at IM Securities, said growth is expected in the cloud solutions segment targeting existing B2B customer networks as well as domestic public institutions and financial firms that are sensitive about data security.

AI data centres and B2B monetisation pace a key second-half variable

Combined second-quarter revenue for the three carriers is forecast at about 15.14 trillion won, and combined operating profit at about 1.46 trillion won. Despite improvements at SKT and LG Uplus, base effects at KT mean overall results for the three are likely to slow somewhat from last year.

Still, based on the core telecom business, some assessment says average revenue per user (ARPU) is improving and cost-efficiency efforts are continuing. With 5G subscriber growth slowing, the three carriers are focusing on defending profitability as they respond to expansion of low-priced plans and competition from budget mobile operators.

The pace of growth in AI data centres and B2B businesses is cited as a key variable for second-half results. The three carriers are fostering AI infrastructure as a new growth axis based on their existing capabilities in telecom networks, data centres and cloud services.

Brokerages expect AI infrastructure investment to continue in the second half on the back of stable cash flow from the wireless business. They also say depreciation from large-scale investment, rising power and facility costs, and the timing of monetisation for new businesses will be variables that will shape future results.

An official in the telecom industry said that with limited room for growth in the telecom market, all three carriers are developing AI data centres and B2B businesses as new growth engines. The official said whether large-scale investment translates into actual revenue and profit will be the key factor that will determine future results.