News ID: 253950
Published: 1036 GMT June 09, 2019

South Korean telecom firms may suffer from cutthroat competition

South Korean telecom firms may suffer from cutthroat competition

SK Telecom, KT and LG Uplus are expected to see their balance sheets worsen in the coming quarter as a result of the cutthroat competition to attract more subscribers to their fifth-generation (5G) network services, analysts said Sunday.

The concern comes as the number of 5G service subscribers is expected to top the one million mark this week, Korea Times reported.

To leap ahead in the next-generation service, the mobile carriers have engaged in fierce competition as they have invested heavily in 5G network equipment and marketing.

Given they have been offering large subsidies to new subscribers to their 5G services, industry analysts said such negative factors will begin to be reflected in the second quarter of 2019.

Since the three mobile carriers launched the world's first commercial 5G services on April 3, the number of 5G subscribers reached 270,000 in April, according to company officials. They attracted about 507,000 more subscribers in May and the figure is expected to surpass the one-million mark by mid-June.

The three mobile carriers have offered around 200,000 won in subsidies to those purchasing Samsung Electronics' 4G-enabled Galaxy S10 smartphone while they have given 720,000 won to customers who purchase the 5G-enabled version.

Industry analysts said it is inevitable for the mobile carriers to offer more financial benefits because it is important to attract more subscribers to take the lead in the 5G race.

"The size of the subsidy for purchasing 5G-enabled smartphones is three times that offered to those buying 4G-enabled smartphones because they are putting more importance on raising the number of 5G subscribers in the early stages of the new network service," said Ko Eui-young, an analyst of Hi Investment & Securities.

Sean Hwang, an analyst of Moody's, said SK Telecom's outlook remains negative due to several key downside risks including the cutthroat competition to acquire more 5G subscribers and spending for 5G network expansion.

"Key downside risks to this expectation include sluggish earnings as a result of stiff competition for 5G subscribers, a failure to improve profitability in non-telecom businesses, and higher-than-expected capital spending to accelerate its network expansion," Hwang said in a report.

Industry officials said the Korea Communications Commission (KCC), which has been criticized for just issuing a verbal warning to the carriers, may put the brakes on the excessive financial benefits.

The KCC gave the mobile carriers a warning in May when suspicions arose that they were offering illegal subsidies to new subscribers following the launch of LG Electronics' 5G smartphone.





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