(Seoul = Yonhap News) Reporter Park Hyeong-bin = SK Telecom [017670] and LG U+ [032640] improved profitability in the third quarter of this year thanks to the recovery of performance in the main telecommunications business and the growth of the artificial intelligence (AI) business.
Although the base effect from last year's hacking incident and one-time labor expenses increased operating profit, the increase in sales from corporate businesses, including AI data centers (AIDC), also supported performance.
Both companies are accelerating their investment in AI infrastructure, but as large-scale upfront investments are required, customer acquisition, financing, and return on investment are expected to be key to mid- to long-term growth.
◇ Recovery of main business and AI growth due to base effect… SKT·LGU+ operating profit surges
According to the telecommunications industry on the 4th, SK Telecom recorded 4.4973 trillion won in sales and 552.3 billion won in operating profit on a consolidated basis in the third quarter of this year. These are increases of 13.1% and 1,40.3%, respectively, compared to the same period last year.
The surge in operating profit was largely due to base effects such as subscriber loss and customer compensation costs due to the hacking incident last year. However, it recorded an operating profit of 500 billion won for three consecutive quarters, recovering its profitability to the pre-hacking level.
Wireless sales increased 21.6% last year, escaping from the impact of decreased sales due to customer compensation.
The AI business also showed growth. AIDC sales recorded KRW 126.1 billion, up 6.2% from the same period last year, thanks to increased data center operation rates and increased submarine cable traffic. However, it decreased by 7.4% compared to the previous quarter.
AI business sales for companies and consumers increased by 27.3%, thanks to new cloud orders.
LG U+ recorded 3.9813 trillion won in sales and 297.6 billion won in operating profit on a consolidated basis. Sales decreased by 0.7% compared to the same period last year, but operating profit increased by 84.1%.
Last year, the base effect from one-time labor expenses and business structure efficiency led to profit improvement.
Mobile sector sales decreased by 0.9%, but mobile service sales excluding access revenue increased by 0.4%. Total mobile subscription lines also increased by 6.2%.
Sales in the corporate infrastructure sector increased 10.4% to 472.2 billion won. Among these, AIDC sales increased by 27.7% to KRW 131.7 billion, thanks to the expansion of colocation and data center design, construction, and operation (DBO) business. It increased by 6.1% from the previous quarter.
Solution sales also increased by 3.4% to KRW 124.4 billion due to the expansion of the AI Contact Center (AICC) business.
◇ AI data center expansion begins in earnest… Securing customers and recovering investment is a challenge
As demand for AI infrastructure leads to increased sales, both companies' investments in data centers are also expanding.
SK Telecom reorganized its AIDC business promotion system by launching SK Hyper and SK Horizon in July and August, respectively. SK Hyper is responsible for business development, and SK Horizon is responsible for infrastructure operation and expansion.
SK Horizon is building a new data center of approximately 180 MW (megawatts) in Ulsan and Seoul, and SK Hyper is discussing business conditions with potential customers, focusing on Ulsan.
In the mid- to long-term, the plan is to expand domestic data center capacity to a total of 15GW (gigawatts) by 2035 to meet global customer demand.
SK Hyper CEO Jeong Seok-geun predicted in a recent interview with Bloomberg News that $350 billion, including equipment costs, would be needed for the first stage of 5GW scale construction. This is an estimate of the total project cost to be shared by the tenant company and external investors.
SK Hyper plans to attract its first external funding late this year or early next year.
SK Telecom previously decided to gradually invest up to 750 billion won in SK Hyper by 2030.
LG U+ is building an AIDC with a power reception capacity of 200MW in Paju, Gyeonggi Province, and plans to sequentially operate a total of four buildings by 2028.
The first building, which has already secured customers, is under construction with a capacity of 50 MW and is scheduled to begin operation after completion in June next year.
Due to the expansion of AIDC investment, LG U+'s facility investment in the third quarter on a separate basis was 569.8 billion won, an increase of 30.1% compared to the same period last year.
In the industry, data centers can become a stable sales base if they secure long-term customers, but there are voices expressing concern about the fact that a huge amount of money is invested in initial construction costs and power and cooling facilities.
One official said, "AI data centers have a large initial investment burden, so it is difficult to judge business performance based on sales growth alone. While the AI bubble theory is inciting fear, securing stable long-term customers and the speed of investment recovery will determine future profitability."
