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LG Uplus records 61% drop in net profit in 1Q12 as operating expenses rise

11 May 2012

South Korea’s smallest mobile network operator by subscribers, LG Uplus, has released its financial results for the three months ended 31 March 2012, revealing a 61% drop in net profit as expenses increased following the rollout of its Long Term Evolution (LTE) network. For the telco’s first quarter of the 2012 financial year it posted a net income of KRW22.1 billion (USD19.89 million), down from KRW57.0 billion in the same period of 2011. The decline came despite an increase in revenue, with total turnover for the three-month period up 20.6% year-on-year at KRW2.116 trillion, with LG Uplus noting that the increase was driven by growth in both handset and service revenues. Wireless services accounted for KRW894.1 billion of the company’s total revenue for the period, up 8.7% year-on-year, while wireline turnover stood at KRW749.6 billion, a 3.8% increase against 1Q11.

Offsetting the revenue growth, LG Uplus revealed that operating expenses had surged to KRW2.474 trillion in the first quarter of 2012, up 22.4% compared to the KRW2.022 trillion reported in year-ago period. It highlighted a number of elements tied to its new 4G network in explaining the higher costs, pointing to a 33.8% annual increase in electricity costs due to the increased number of LTE base stations, while also noting that a higher volume of LTE handset sales meant that the costs of handsets sold had risen by 82.2% y-o-y.

At the end of March 2012 LG Uplus’ mobile subscriber base totalled 9.554 million, up 5.3% compared to the number of customers on its books a year earlier, while the operator also revealed that LTE subs had risen to 1.484 million, up from 557,000 at the end of the previous quarter; comparable LTE customer numbers were not available for end-March 2011, as the network was not launched until July 2011. Fixed broadband subscribers meanwhile stood at 2.765 million at the end of 1Q12, down from 2.787 million a year earlier, while voice-over-internet protocol (VoIP) and PSTN accesses numbered 3.299 million and 360,000 respectively (up from 2.888 million and 311,000). IPTV subscribers at the end of the quarter totalled 893,000, up from 678,000 at end-March 2011.

South Korea, LG Uplus

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