[BizHanKook] SK Telecom and LG Uplus both recorded significant increases in operating profit in the third quarter of this year. However, this rebound was largely driven by a base effect resulting from one-time costs incurred last year. With growth in their traditional mobile telecommunications businesses reaching a plateau, both companies are cultivating AI data centers as a new growth engine. As investments in AI infrastructure ramp up, whether they can translate customer demand into stable revenue and secure investment profitability has emerged as a key variable for future performance.
Surging Operating Profits… But Only Due to Decreased One-Time Costs
According to the Financial Supervisory Service's Data Analysis, Retrieval and Transfer System (DART) on the 4th, SK Telecom recorded consolidated revenue of 4.4973 trillion KRW and an operating profit of 552.3 billion KRW for the third quarter. These figures represent increases of 13.1% and 1,040.3%, respectively, compared to the same period last year. Net profit turned to a surplus of 411.8 billion KRW.
The more than 11-fold increase in operating profit was largely due to the disappearance of cost burdens related to a USIM data leak incident that occurred last year. In the third quarter of last year, SK Telecom's operating profit had dropped to 48.4 billion KRW due to incident-related expenses, such as customer compensation packages. This year, the company's performance rebounded significantly thanks to this base effect.
LG Uplus reported consolidated revenue of 3.9813 trillion KRW and an operating profit of 297.6 billion KRW for the third quarter. Compared to the third quarter of last year, revenue decreased by 0.7%, while operating profit increased by 84.1%.
This is due to the removal of one-time labor cost burdens associated with voluntary retirements from last year. Efforts to streamline business structures also contributed to improved profitability. In fact, labor costs on a separate basis decreased by 31.0% compared to the same period last year.
Meanwhile, KT is scheduled to announce its third-quarter results next week. According to brokerage estimates compiled by financial information provider FnGuide last month, the combined operating profit of the three major telecom companies for the third quarter is expected to reach 1.369 trillion KRW, an 82.9% increase year-on-year.
AI Data Center Revenue Grows Side-by-Side… Emerging as a Corporate Growth Engine
Telecom companies are expanding their AI data center and corporate AI service businesses to compensate for the slowing growth of the mobile telecommunications sector. With domestic 5G penetration exceeding 80%, the potential for revenue growth through subscriber acquisition is limited, leading to a strategy of securing AI infrastructure demand from corporate clients as a new revenue source.
Both SK Telecom and LG Uplus saw their third-quarter AI Data Center (AIDC) revenue increase compared to the same period last year. However, while SK Telecom experienced a temporary revenue gap due to transitions to new contracts, causing AIDC revenue to drop compared to the previous quarter, LG Uplus maintained its growth momentum, centered on colocation and Data Center Design, Build, and Operate (DBO) businesses.
SK Telecom's third-quarter AIDC revenue was 126.1 billion KRW, a 6.2% increase year-on-year. The rise in data center utilization and increased submarine cable traffic contributed to the revenue growth. However, this was a 7.4% decrease compared to the previous quarter's 136.2 billion KRW, due to a temporary revenue void during the process of transitioning to new long-term contracts for their GPUaaS (GPU-as-a-Service) business.
AI B2B and B2C businesses showed relatively high growth. Revenue in this segment reached 70 billion KRW, an increase of 27.3% year-on-year and 14.2% quarter-on-quarter, driven by new cloud business contracts. SK Telecom is currently applying its proprietary AI foundation model to its "A." service and corporate AI services, while also pushing to expand services that combine telecommunications and AI technology.
For LG Uplus, AIDC drove growth in the corporate infrastructure sector. Third-quarter corporate infrastructure revenue was 472.2 billion KRW, up 10.4% year-on-year. Of this, AIDC revenue accounted for 131.7 billion KRW, an increase of 27.7%. The expansion of the colocation business, which leases data center space and facilities, and the DBO business had a significant impact.
Solution revenue increased by 3.4% to 124.4 billion KRW, supported by growth in the AI Contact Center (AICC) business, while corporate line revenue rose 5.7% to 216.1 billion KRW. Even amidst a decline in total service revenue, the corporate infrastructure business recorded double-digit growth.
Telecom Companies Accelerate AIDC Expansion… Focusing on Long-Term Contracts and Investment Efficiency
Both companies are accelerating data center expansions to meet AI infrastructure demand. As the construction of new, large-scale AIDCs gets into full swing, how much customer demand they can secure and how effectively they can recover investment costs have emerged as critical challenges.
SK Telecom has begun securing new customers and financing for the expansion of its AI data center business. SK Hyper, established in July, has obtained construction permits for partial capacity at a data center in Ulsan and is currently negotiating specific business terms with three to four global operators. The company is also pursuing site acquisition and customer recruitment in multiple locations outside of Ulsan.
To reduce the financial burden of large-scale investments, the company also plans to actively utilize external capital. SK Telecom's strategy is to lower its direct investment burden by sourcing a significant portion of the capital required for gigawatt (GW)-scale data center development from external sources, such as financial investors.
Park Jong-seok, CFO of SK Telecom, stated during the earnings conference call that day, "We aim to secure customer demand for initial operational volume by the first half of next year at the latest, and through permitting and construction procedures, we plan to open the data centers in phases starting from the second half of 2029."
LG Uplus plans to expand its investments beyond original projections due to rising demand for AI data centers. Yeo Myung-hee, CFO of LG Uplus, also mentioned during the conference call, "As the adoption of AI across domestic industries accelerates, our AI investments are picking up speed compared to our initial plans. AIDC, which has a high investment weight, is seeing accelerated expansion based on robust customer demand."
The company also expects capital expenditure (CAPEX) to increase. CFO Yeo predicted that for this year, CAPEX would be higher than the previous year due to deferred investments from last year and network investments related to 5G Standalone (SA). While there may be fluctuations next year depending on the speed of Paju AIDC expansion and investment scale, she forecasted that CAPEX would still likely exceed this year's figures.