The focus of capital spending by South Korea’s three mobile carriers is shifting from traditional telecom networks such as base stations to AI infrastructure. With 5G network buildouts entering a stable phase and demand for AI data centres (DC) rising, carriers’ core investment areas are increasingly centred on AI.

The telecom industry said on Tuesday that SK Telecom, KT and LG Uplus have recently announced a series of large-scale plans to expand AI data centres. As they deploy cash generated from existing telecom businesses into AI infrastructure, the nature of carriers’ CAPEX is changing.

CAPEX at the three carriers rose sharply around the 2019 commercial launch of 5G, centred on building nationwide networks including base stations and repeaters. As 5G construction has moved into a stabilisation stage, spending focused on existing telecom networks has gradually declined. Investment is still needed for a shift to 5G standalone (SA) mode and preparations for 6G, but experts say AI will now become the core pillar of carriers’ investment.

New investment tilts to AI data centres as carriers compete to expand

This trend is also visible in this year’s results. SKT and KT cut CAPEX focused on existing telecom infrastructure in the first half from a year earlier.

Combined first-half CAPEX by SKT and SK Broadband was 624.0 billion won, down 15.8 percent from 741.0 billion won a year earlier. KT spent 718.0 billion won on a standalone basis in the first half, down 15.1 percent from 846.0 billion won a year earlier. LG Uplus, however, increased first-half CAPEX to 795.0 billion won from 726.4 billion won a year earlier.

Capacity for new investment is rapidly shifting to AI data centres. As generative AI spreads, demand for high-performance computing is rising, and AI data centres are becoming a new growth engine for carriers.

SKT’s second-quarter AI data centre revenue was 136.2 billion won, up 92.5 percent from 70.7 billion won a year earlier. It was also up 3.6 percent from the previous quarter. The company said expanded data centre operations and contributions from submarine cable revenue drove growth. AI B2B and B2C revenue in the quarter was 61.3 billion won, up 24.5 percent from a year earlier. The contrast with its core telecom business was clear. SKT’s second-quarter mobile service revenue was 2.56 trillion won, down 1.9 percent from a year earlier.

SKT last month also set up a wholly owned subsidiary, SK Hyper, dedicated to AI data centre business development. SK Hyper will secure sites and power-receiving infrastructure and handle new AI data centre development, including building substations and transmission and distribution lines and attracting customers. The company is pursuing a first-stage expansion plan to open 5 gigawatts in phases from 2029, considering customer demand. It also plans to significantly scale up the AI data centre business through a second-stage plan to expand to 15 gigawatts.

KT is also presenting AI infrastructure as a key pillar of mid- to long-term growth. KT set a goal of adding 1 gigawatt of AI data centre capacity and 90 Tbps of submarine cable capacity by 2031 based on actual demand, aiming to become an “Asia AX connectivity hub.” It will also pursue improvements in network quality, capacity expansion and preparation of core technologies for future networks.

Expanding AI infrastructure has also been reflected in results. KT Cloud’s second-quarter revenue was 265.4 billion won, up 19.8 percent from 221.5 billion won a year earlier. Higher utilisation at its Gasan data centre and increased revenue from data centre design and construction led growth.

LG Uplus is accelerating investment expansion centred on its Paju AI data centre. Its rise in first-half CAPEX was also influenced by construction of the Paju AI data centre. The Paju site targets power-receiving capacity of 200 MW and aims to begin full-scale operations in the first half of next year.

AI-related performance is also strong. LG Uplus’ second-quarter AI data centre revenue was 124.1 billion won, up 28.9 percent from a year earlier and 8.5 percent from the previous quarter. Total corporate infrastructure revenue rose 8.6 percent from a year earlier to 464.4 billion won. The company plans to open four buildings at the Paju AI data centre sequentially in 2027 to 2028 and to pursue a design, build and operate (DBO) strategy in parallel to secure additional capacity and build regional hubs.

Network investment remains unavoidable as limited resources must be allocated

Experts agree that CAPEX at the three carriers should be seen in terms of reallocating investment destinations. A telecom company official said that in the early stage of 5G commercialisation, network buildout such as base stations and core networks accounted for a large share of CAPEX. The official said the trend is shifting toward maintaining existing networks while focusing on allocating investment resources to AI infrastructure.

AI data centres, unlike existing telecom networks, can be directly linked to new revenue, giving a strong incentive to invest. With growth in core telecom businesses slowing, the analysis said it is a natural step for AI infrastructure to emerge as a new axis of revenue growth.

Still, network investment cannot be cut indefinitely. KT, in its second-quarter earnings release, specified improvements in network quality, capacity expansion and preparation of core technologies for future networks as part of its mid- to long-term strategy. SKT and LG Uplus also need network investment to shift to 5G SA and prepare for 6G.

An industry official said the trend will strengthen toward allocating capital to AI infrastructure that can create new revenue while keeping networks stable. The official said that as AI data centres require large investment, customer demand, utilisation rates and the ability to secure power will determine carriers’ investment efficiency.