S.Korean telcos accelerate diversification amid strong Q2

South Korea’s two largest telecom companies, SK Telecom Co. and KT Corp., have both delivered strong second-quarter results driven by rapid growth in their non-telecom businesses.

The market leader SK Telecom on Aug. 11 reported a quarterly operating profit of 396.6 billion won ($343 million) on revenue of 4.82 trillion won ($4.2 billion). Its operating profit was up by 10.8% versus the same period last year, while its revenue increased by 4.7%.

Another industry player KT also posted an operating profit of 475.8 billion won ($411 million) on revenue of 6.03 trillion won ($5.2 billion). The operating profit was 38.5% higher than last year’s second quarter, and its revenue was 2.6% higher.

SK Telecom’s telecom business still accounted for the majority of its quarterly revenue, recording 3.02 trillion won ($2.61 billion), growing by 2.7% from the 2020 figure. The operating profit in the segment recorded 328.4 billion won ($283 million), up by 21.7% from the same period in 2020. The growth was mainly driven by the higher number of 5G subscribers, which increased by about 1 million people during the last quarter to reach 7.7 million.

More noteworthy was its new ICT unit that posted 1.58 trillion won ($1.37 billion) in revenue, up by 10.1% from 2020. Its new ICT business includes media, surveillance and e-commerce segments.

The media segment, which includes South Korea’s largest streaming service Wavve, reported revenue growth of 8.7% to 997.1 billion won ($862 million). The surveillance segment, spearheaded by ADT Caps Co., reported revenue growth of 14.5% to 369.8 billion won ($320 million). SK Telecom is continuing with the IPO process of ADT Caps, targeting to list the surveillance company within 2021.  

“Our new ICT business continued to make up about 31-32% of total revenue. Our business units outside the telecom sector will take up more than one-third of our revenues,” said SK Telecom.

The commerce segment within the new ICT business also reported revenue growth of 9.6% to 211 billion won ($182 million), but made an operating loss for the first time in four quarters. Analysts highlighted that SK Telecom saw 6.6 billion won ($5.7 million) in losses in the segment, due to heightened competition in the e-commerce industry.

“11 Street Co. started quicker delivery services in partnership with Korea Post. We are also set for opening the Amazon Global Store according to schedule,” said SK Telecom.

SK Telecom will confirm its pre-announced plan for spin-off at the shareholder meeting on Oct. 12. The new entity, which will focus on making investments in future growth areas, aims to raise SK Telecom’s current net asset value of 26 trillion won ($22.4 billion) to 75 trillion won ($64.7 billion) by 2025.

INDUSTRY-WIDE SHIFT TOWARDS NON-TELECOM SEGMENTS

KT Corp.’s second-quarter earnings result also shows that the company is rapidly expanding its non-telecom business areas.

KT’s revenue from its mobile telecom business was 1.69 trillion won ($1.46 billion), growing by 4.5% from the same period last year. On the other hand, its internet TV business grew much faster during the given period, by 14.5%.

Analysts noted that KT has also made significant growth in its business-to-business (B2B) segments, especially in artificial intelligence (AI) and digital transformation (DX). The AI and DX businesses posted combined revenue of 137.2 billion won ($118 million), growing by 6.2% from the second quarter in 2020.

“KT improved its operating profit with strong performances of its key affiliates including BC Card and K Bank,” said KB Securities analyst Kim Jun-seok.

Write to Han-gyeol Seon at always@hankyung.com
Daniel Cho edited this article.