• SK Telecom is feeling the financial impact of its cybersecurity breach
• While its revenues have only taken a slight hit, its profit margins have been hammered and its mobile subscriber base is shrinking
• By contrast, domestic rivals KT and LG Uplus are picking up new mobile customers and reporting sales and profit growth

‘One man’s loss is another man’s gain’, so the saying goes, and that certainly seems to be the case in South Korea, where KT Corp and LG Uplus are starting to benefit from the fallout of rival SK Telecom’s major cybersecurity breach that took place during the second quarter of this year. 

As a reminder, SK Telecom (SKT) reported a major data breach on April 19 that sent the company into a tailspin and its customers looking for alternative providers. By the time SKT introduced its Accountability and Commitment Program, which includes a $514m investment in new security systems and processes, in early July as part of its efforts to “rebuild customer trust”, it had lost more than 800,000 mobile customers and was facing major associated costs. 

Last week, SKT reported second-quarter revenues of 4.34tn Korean won ($3.12bn), down just 1.9% year on year, but its operating profit slumped by 37.1% to 338bn won ($243m) and its net profit sank by 76.2% to 83bn won ($60m). The operator attributed the profit reductions to “one-time costs, including customer SIM card replacements and retail stores’ loss compensation”. SKT’s only saving grace was that its AI-related operations, which it has been developing for a couple of years, showed encouraging growth and helped, in part, to counter the slump in consumer mobile service revenues: SKT last year unveiled a new corporate structure to help it capitalise on its primary growth opportunities of AI and communications services.

At the end of June, SKT had 21.98 million mobile customers (excluding mobile virtual network operator and internet of things connections), of which just over 17 million were 5G users, down from 22.73 million (including 17.24 million 5G users) at the end of March. Many of those customers left towards the end of the quarter so the impact on SKT’s revenues was somewhat limited in the second quarter – the year-on-year (negative) comparison is likely to be more stark when it reports its third-quarter results. 

As SKT takes major cost hits and loses customers, the story is very different at its two main domestic rivals.   

KT Corp has just reported second-quarter revenues of 7.43tn won ($5.34bn), up by 13.5%, while its operating profit leaped by 105.4% to just over 1tn won ($730m), though this was mainly due to gains from property sales and growth in its AI-related operations: KT outlined its AI-based service aspirations in mid-2023 and positioned itself as an AICT (AI plus ICT) company in early 2024.

KT’s net profit increased by 78.6% year on year to 733bn won ($527m). 

It ended June with 13.66 million mobile customers (excluding MVNO and IoT connections), including 10.87 million 5G customers, up from 13.35 million (including 10.55 million 5G users) at the end of March. 

In mid July, and clearly in response to SKT’s situation, KT pledged to invest more than 1 trillion won ($730m) over the next five years on its cybersecurity defences. 

LG Uplus also promised to invest heavily in its security: At the end of July it issued a press release (in Korean) to say it would invest 700bn won ($504m) over the next five years in its “information security” systems as it unveiled its “security-first strategy”. 

And it also saw its financial and customer metrics head in the right direction in the second quarter. It reported revenues of 3.84tn won ($2.77bn), up 10% year on year, an operating profit of 304.5bn won ($219m), up 19.9%, and a net profit of 217.1bn ($156m), up by 31.9% year on year.   

It ended June with 11.18 million mobile customers (excluding MVNO and IoT), of which 8.93 million were 5G users, up from 10.96 million mobile users (of which 8.2 million were 5G users) at the end of March.

LG Uplus is also engaging in multiple AI infrastructure and service developments – see South Korea’s LG Uplus expands its AI strategy.

- Ray Le Maistre, Editorial Director, TelecomTV