South Korean mobile players started to feel the full benefit of 5G on their top lines seven quarters after introducing the next-generation service, with the three major players recording year-on-year mobile revenue growth and mostly improving ARPU in 2020.
LG Uplus led the market with 5.1 per cent growth in mobile service revenue, with2.8 per cent for SK Telecom (SKT) and 1.6 per cent for KT. All were significant improvements over 2019 figures.
Neale Anderson, head of Asia telecoms research at HSBC, told Mobile World Live 5G had certainly helped, noting the collective performance was “not bad considering the hit to roaming revenue” due to the Covid-19 (coronavirus) pandemic.
He forecast 2.5 per cent growth in mobile service turnover at SKT in 2021, 3 per cent at KT and 5.4 per cent at LG Uplus.
Despite operators launching low-to-mid tier 5G plans late in 2020 to broaden the appeal, he believes the risk of a price war is quite low since, with about 25 per cent of handset users already on 5G plans, lower tariffs are appropriate for the next wave of adoption.
Anderson acknowledged forecasting the ARPU trend is trickier than revenue as it can be affected by second device connections, so tends to focus on service revenue.
Marc Einstein, chief analyst at Japan-based research company ITR, suggested that despite relatively small gains in absolute terms, 5G seems to be helping to stop the severe ARPU erosion the market faced in the LTE era when voice and SMS revenue were hammered by OTT services like KakaoTalk.
South Korean operators ended 2020 with 11.9 million 5G subscribers, a net gain of 7.2 million. The pace of adoption increased slightly, from 1.55 million per quarter in 2019 to 1.8 million.
SKT forecasts ending 2021 with 9 million 5G subscribers, a projected net gain of 3.52 million, maintaining roughly the same growth rate as 2020 and taking the share to 30.9 per cent of its total customer base from 18.8 per cent.
It closed 2020 with 5.48 million 5G subscribers, up by 3.4 million. Supported by a wider handset line-up including the iPhone 12 series, the operator added 1.2 million subscribers in Q4, outpacing its average quarterly gain of 850,000.
On the downside, it was the only operator to register an ARPU drop, down 3 per cent year-on-year to KRW30,269 ($27.48) in Q4.
KT signed up 2.2 million 5G subscribers in 2020, taking its total to 3.62 million at end-December, 25.3 per cent of its total.
CFO Kim Young-jin said on an earning calls penetration is forecast to hit 45 per cent by the year-end, implying a total of 6.44 million (assuming its user base remains at about 14.3 million).
After booking a 1.9 per cent improvement in ARPU in Q4 to KRW31,946, the company expects continued 5G adoption to drive a 3 per cent gain this year.
LG Uplus is targeting 4 million 5G subscribers by end-2021, up by 1.24 million, after adding 1.6 million in 2020. The increase would raise the percentage of next-generation users to 27.1 per cent from 18.7 per at end-2020.
ARPU was flat at KRW30,926 in Q4.
Anderson believes 5G will continue to be a drag on profits, certainly in H1 2021, due to higher depreciation and amortisation charges stemming from elevated capex, but noted marketing costs have been relatively stable.
He noted 5G operators in other countries can learn from South Korea that network sharing in rural areas makes sense.
While the nation is recognised for having the widest 5G coverage of any large country in the world, Einstein said what he finds interesting is operators there are more advanced in service creation, introducing AR and VR, gaming, and sports and entertainment offerings.
The key message for other operators, he emphasised, is to watch how these new services employing the speeds and low latency of 5G networks are adopted, since it is becoming increasingly clear increased data use and premium pricing is not going to be enough to generate revenue from the new networks.
The next few quarters will certainly demonstrate whether users’ appetite for these premium services translate into higher ARPU, service revenue and ultimately profit.
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