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2015 Network Infrastructure Investment Plans by KT, SK Telecom and LG U+
02/02/2015 | By Ahn Ho-cheon (hcan@etnews.com)

Korean Big 3 mobile carriers are forecast to reduce their CAPEX by about 9% this year compared to last year.

 

Most of their LTE investments are completed, and their profitability declined last year despite the enforcement of the Terminal Distribution Structure Improvement Act. As the telecommunication industry cuts down CAPEX, small and medium-sized network equipment makers will be directly hit and forced to lower their sales goals.

 

According to the telecommunication industry on February 1, SK Telecom will lower its CAPEX from last year’s KRW2.145 billion to KRW2 trillion this year, and LG Uplus from KRW2,211.9 billion to KRW1,700 billion. Only KT is planning to raise its CAPEX from KRW2,514.1 billion to KRW2,700 billion, and concentrate its investment in the land communication segment owing to the expansion of the Giga Internet (see KT launched GiGA Internet, Korea's first nationwide gigabit Internet service on Oct. 20 and Now giga Internet service available from all the Korean big 3 operators).

 

Accordingly, it seems that the three mobile carriers’ CAPEX will be reduced by about KRW560 billion from last year. As the three telecommunication operators are cutting down their CAPEX, network equipment makers are expected to compete more fiercely in public projects that will start this year, e.g. the National Disaster and Safety Network project.

 

The three mobile carriers are going to identify their new growth engines more aggressively even though their CAPEX shrinks. SK Telecom will embark on the subscriber-based platform business in earnest, and actively seek new growth businesses. In particular, the No. 1 telecommunication operator increased the sales goal for its enterprise solution business by 40% over last year to KRW700 billion. SK Telecom’s IPTV business is planning to reach the goal of 7 million land and mobile users, and the company will expand its global business with focus on In Vitro Diagnostics.

 

KT set it sales goal at more than KRW24 trillion this year. It expects to see the effects of the restructuring and cost reduction starting this year. It is planning to reinforce its top 5 future convergence businesses, including energy and healthcare, and concentrate on securing marker leadership in the Giga Internet segment.

 

“We will also continue to reinforce our business competitiveness this year with focus on differentiated product strategies and customer-first service,” said Shin Gwang-seok, head of the finance department of KT. “The core strategy for 2015 is to concentrate on improvement of profitability.”

 

LG Uplus is planning to concentrate on improving its service quality while enhancing its existing land and mobile networks. It will capitalize on virtualization technologies like Network Function Virtualization (NFV) and Software Definition Network (SDN) to improve its system flexibility and agility. The company will continuously release various IoT services like Smart Home.

 

The prediction that the enforcement of the Terminal Distribution Structure Improvement Act would reduce the marketing expenses of mobile carriers and thus increase their profits was off the mark. The Q4 performance of the three mobile carriers was summed up, and it turned out that, as Mobile Number Portability (MNP) customers decreased, the marketing expenses to take competitors’ customers increased contrary to expectation.

 

The Q4 sales and operating profits of SK Telecom and KT declined in the 4th quarter of last year from the previous quarter. LG Uplus saw its operating profit go up, but its sales went down.

 

Unexpectedly LG Uplus surpassed SK Telecom for the first time in terms of Average Revenue Per User (ARPU). The Q4 ARPU of LG Uplus was KRW37,448 surpassing SK Telecom’s KRW36,673. LG Uplus said that the increased number of video service subscribers using expensive plans, such as Uflix Movie and HDTV, was the biggest contributor to the increased ARPU.

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