A buyer checks the Galaxy S25 Extremely smartphone at SK Telecom’s retail store at Mapo District, Seoul, Tuesday. Courtesy of SK Telecom
Korea’s three cell carriers face big uncertainties of their efforts to reshape their portfolios for synthetic intelligence (AI) providers, because the nation’s antitrust authority is contemplating imposing a mixed 5.5 trillion received ($3.79 billion) in fines as a consequence of allegations of colluding to coordinate gross sales incentives for retailers.
If enforced, the fines will surpass the mixed working revenue of SK Telecom, KT and LG Uplus final 12 months, estimated at 3.53 trillion received, casting a depressing outlook {that a} slowdown within the companies’ investments in AI can be inevitable.
In response to trade officers, the Truthful Commerce Fee (FTC) plans to carry commissioner conferences on Feb. 19 and 26 to research allegations that the cell carriers engaged in unfair enterprise practices since 2015 to regulate buyer numbers.
The commissioner conferences operate equally to a court docket trial, the place commissioners decide whether or not the case is illegal and determine on the suitable stage of fines.
In response to Rep. Choi Soo-jin of the ruling Folks Energy Celebration, the fee has delivered its evaluation opinion, akin to a prosecutor’s indictment, in search of fines of as much as 2.2 trillion received for SK Telecom, 1.69 trillion received for KT and 1.64 trillion received for LG Uplus.
Carriers have been crying foul over the FTC’s transfer, stressing that they coordinated the incentives in keeping with the Korea Communications Fee (KCC) administrative steering of limiting gross sales incentives to inside 300,000 received per smartphone, and the KCC additionally delivered its opinion to the FTC that “it’s troublesome to view the case as collusion.”
The potential fines from the antitrust watchdog are more likely to hinder telecom firms‘ ongoing investments in AI companies.
In response to market tracker FnGuide, Wednesday, brokerages’ consensus on SK Telecom’s working revenue for 2024 stands at 1.84 trillion received, adopted by LG Uplus with 909.3 billion received and KT with 782.9 billion received. Because of this the fines, if imposed on the most quantity, may exceed their working revenue final 12 months.
The mixed working income have been apparently affected by one-off prices associated to workforce and labor points.
SK Telecom is estimated to have spent greater than 80 billion received final 12 months on its voluntary redundancy packages. KT launched a workforce reallocation program in December, which incurred a further expense of 1 trillion received. LG Uplus has arrange over 50 billion received in provisions associated to court docket rulings on calculating strange wages.
Every of the three firms will maintain its earnings name later this week, the place they may reveal their respective capital bills (CAPEX) for 2024. Analysts assume their mixed 2024 CAPEX will attain 7.76 trillion received, up from 7.67 trillion received a 12 months earlier, as they scale down spending on 5G networks whereas increasing investments in AI infrastructure.
KT CEO Kim Younger-shub, left, shakes palms with Microsoft Korea CEO Cho Received-woo throughout a strategic workshop in Seoul, Jan. 14. Courtesy of KT
In November, SK Telecom introduced a 100 billion received funding plan to develop sovereign AI. It just lately opened an AI information heart in Seoul, outfitted with Nvidia’s dear H100 AI processors.
KT introduced its strategic partnership with Microsoft in October final 12 months with plans to spend 2.4 trillion received on its AI providers. LG Uplus additionally plans to speculate 3 trillion received in AI companies by 2028.
“The fines could not attain the trillion received stage, as a result of the quantity at present being suspected is just too big in comparison with the businesses‘ free money stream,” Kim A-ram, an analyst at Shinhan Securities, stated.
“There are a number of precedents of commissioners decreasing the precise fines throughout their conferences on related instances,“ Kim added. „If the fines become much less vital than at present anticipated, the businesses will have the ability to handle them with out main difficulties. Nevertheless, if the quantity exceeds expectations, it may negatively impression investor sentiment.”
