Wireless Earnings Bolstered by Cost Controls
The author is an analyst of KB Securities. He can be reached at joonsop.analyst@kbfg.com. -- Ed.
2Q22 review: OP at KRW248.4bn (-7.5% YoY)
— LG Uplus posted 2Q22 consolidated OP of KRW248.4bn (standalone at KRW244.5bn), in line with the market consensus of KRW256.5bn (FnGuide, last three months). OP slid 7.5% YoY. Excluding KRW45.0bn in preemptive booking for employee buyouts, OP would be at a decent KRW293.0bn (MoneyS, Jul 17), which is in line with our estimate of KRW297.4bn.
— Wireless registered revenue of KRW1.46tn (+1.9% QoQ), MNO subscribers of 15.66mn (+1.9% QoQ), wireless ARPU of KRW29,597 (-0.1% QoQ) and estimated mobile ARPU of KRW38,167 (+1.8% QoQ).
— Enterprise Infrastructure posted revenue of KRW403.2bn (+11.2% QoQ) thanks to strong performance from IDC, Solution and Enterprise Line.
— In short, earnings were supported by steady growth at Wireless and Enterprise Infrastructure and decreases in key costs (e.g., marketing, D&A).
— Interim DPS jumped 25% YoY to KRW250 because of earnings improvement.
Wireless: Earnings bolstered by cost controls
— Marketing costs seem to be on a downtrend, falling 0.3% YoY/4% QoQ. The revenue proportion of wireless services stood at a three-year high of 21.4% thanks to an aggressive MVNO strategy.
— D&A climbed 2.2% YoY but fell 0.9% QoQ. The mandatory establishment of base stations for the recently allocated 20MHz bandwidth of the 3.5GHz spectrum (15k by 1H23) is controversial (Economic Review, Jul 12) but should not significantly impact cost structure.
Enterprise Infrastructure: Revenue steady at Solution, IDC, Enterprise Line
— Top-line growth was steady at Solution (KRW134.0bn, +20.4% QoQ), IDC (KRW69.1bn, +8.2% QoQ) and Enterprise Line (KRW200.1bn, +6.8% QoQ).
— Solution released its 5G/cloud-based smart factory service and is enjoying orders from SMEs. The business is also building/installing a safety control system (to prevent major accidents) within the year and will launch it as a service that is expected to cater to SMEs unable to install their own systems because of burdensome initial costs and insufficient maintenance know-how.