LG Uplus Q3 net falls 32% on 5G investment

Seoul: LG Uplus Corp., South Korea's No. 3 mobile carrier, has said its net profit dropped 32.1 per cent in the third quarter (Q3) from a year earlier due to increased spending for 5G infrastructure buildup and marketing.

Net profit stood at 104.5 billion won or $89.5 million in the July-September period, compared with 153.8 billion won a year ago, LG Uplus said in a regulatory filing, Yonhap news agency reported on Friday.

Third-quarter sales rose 8.4 per cent on-year to 3.2 trillion won, and operating profit decreased 31.7 per cent to 155.9 billion won over the three-month period, the firm said.

LG Uplus said it's profits decreased, despite solid sales, due to increased marketing costs and continued investment for 5G networks that rolled out in early April.

The company's marketing spending soared 17.5 per cent on-year to 586.1 billion won in the third quarter, as it carried out aggressive campaigns for 5G service. Its capital spending skyrocketed 169.4 per cent to 784.4 billion won over the period in line with the construction of 5G base stations.

LG Uplus said revenue from its mainstay mobile business gained 3.5 per cent to 1.4 trillion won in the third quarter, thanks to an increased number of 5G subscribers.

The company said it had about 875,000 5G users as of September, which accounted for 5.9 per cent of its total mobile subscribers.

Sales from its smart home division surged 3.2 per cent to 995 billion won, led by robust IPTV and high-speed internet business.

The number of its IPTV subscribers jumped 11.5 per cent on-year to 4.4 million in the third quarter, and that of high-speed internet users grew 5.4 per cent to 4.2 million, it noted.

LG Uplus said it will speed up building 5G base stations across the nation to improve the quality of the network and boost premium service users, and that it will create new revenue streams with various services for enterprise users, including connected cars and smart factories.

The company said it expects to have about 1.5 million 5G users by year-end, about 10 per cent of the total mobile subscribers.

"If Apple launches 5G smartphones and the network quality improves next year, the number of 5G users could rise to 30 per cent of the total by the end of 2020," Lee Hyuk-joo, the firm's chief financial officer, said during a conference call.

The company said the capital expenditure for 2020 will be similar to this year as it plans to expand 5G coverage beyond the Seoul metropolitan area.

Shares of LG Uplus fell 1.86 per cent to 13,200 won on the Seoul bourse, hovering below KOSPI's 0.8 per cent gain. The earnings report was released before the market closure.