South Korea’s telecom stocks have been underperforming this year, and analysts point out that the commercialization of 5G network services, likely to start in March, will impact their price.

According to the Korea Exchange, the nation’s top mobile operator SK Telecom’s share price plunged 5.2 percent since the beginning of the year, as of Friday’s closing. KT and LG Uplus shares dropped 4.2 percent and 15 percent, respectively, in the same period. 

Foreign investors, despite being the driving force behind the recent bullish rally on the benchmark Kospi -- where the major three telecom firms are listed -- turned to a net selling mode regarding telecom stocks. From Jan. 1 to Friday, overseas investors net sold SK Telecom shares worth 188.6 billion won and LG Uplus stocks worth 49.8 billion won.

The dampened investor sentiment in telecom stocks is due to concerns over the telecom firms’ lackluster fourth-quarter earnings, analysts noted.

“The weak fourth-quarter earnings of three major telecom companies dampened investor sentiment and they are likely to maintain a conservative stance until the expansion of 5G network takes shape later this year,” said Choi Nam-gon, an analyst from Yuanta Securities.

SK Telecom’s net income in the fourth-quarter last year stood at 474.5 billion won, a 54.8 percent drop on-year.

Meanwhile, KT logged 18.1 billion won in net profit during the same period, compared with a net deficit of 123.5 billion won a year ago, but its operating profit dropped 28.4 percent on-year to 95.9 billion won. LG Uplus’ net profit plummeted 55.4 percent on-year to 65.5 billion won in the same period.

“With the launch of 5G smartphones and commercialization of the high-speed network, telecom stocks will rebound regardless of the overall index. The value of telecom stocks will depend on consumers’ response to 5G-related services and businesses,” said Hwang Sung-jin at Hyundai Motor Securities.

By Jung Min-kyung (mkjung@heraldcorp.com)