Is Korean profit bump sign of 5G turning the corner?

South Korean telcos are about to enjoy a Q3 earnings spike thanks to 5G, analysts have forecast.

Aggregate operating profits of the three big telcos will improve 15% to 1.0 trillion won ($880 million) for the July-September quarter, according to an analysts' poll by Yonhap Infomax news service.

KT is set to boost operating profit by 27.2%, SK Telecom by 9.3% and LG Uplus by 10.3%, the survey of 13 securities firms predicts.

Half way up the stairs: Is South Korea nearing the top of the 5G stairs after all?  (Source: REUTERS / Alamy Stock Photo)
Half way up the stairs: Is South Korea nearing the top of the 5G stairs after all?
(Source: REUTERS / Alamy Stock Photo)

Each of the three has seen a spurt in 5G take-up in recent months, most likely sparked by the release of new phones. Monthly net adds rebounded to around 700,000 in August, up from a low of 600,000 in June and July.

In particular, Samsung's two new foldable 5G phones have been flying off the shelves, accumulating total sales of more than 1 million units since their launch in late August.

Five alive

This positive 5G news from a bellwether market like Korea prompts the question: has 5G turned the corner?

The new networks might have attracted plenty of customers, but up to now service providers are still searching for the financial pay-off.

We've certainly seen hints of progress. In Q2 both SKT and KT enjoyed a bump in operating profit on the back of stronger 5G numbers. In nearby Hong Kong, Smartone and HKT have also reported higher earnings and ARPU from 5G.

What is significant is that both markets have been getting some genuine scale. South Korea reported 17.8 million 5G subs at the end of August, accounting for a quarter of all mobile customers.

That kind of heft can start to deliver some meaningful savings. In Korea even though only KT is moving to 5G standalone, which maximizes efficiencies, it seems fair to assume the lower costs are starting to impact the bottom line.

Of course the subscriber take-up, the higher package prices and the lower opex are meant to be just the initial returns. The big enterprise services are some years away, but maybe the Korean operators, when they report their results next month, also have a story to tell about their XR, video and gaming services.

Bigger is better

To take a macro view of 5G, Counterpoint Research says the economics is becoming attractive because of the scale of the ecosystem.

There's been around 200 operator launches and nearly half a billion phones shipped, with both milestones achieved well ahead of the corresponding periods in 4G.

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Yet the ingredients that Counterpoint says will drive 5G's "second wave" - standalone and mmwave – are absent from Korea and other markets.

Which sounds like further affirmation that 5G has plenty of upside.

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— Robert Clark, contributing editor, special to Light Reading

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