KT has announced plans to unveil its hyper-scale artificial intelligence data center (AIDC) business by the end of the year, completing a competitive landscape among the three major telecom companies. Each company has adopted a different business structure.
On August 11, SKT revealed it established a separate entity, 'SK Hyper,' dedicated to AIDC development, with plans to invest 750 billion won by 2030. LG Uplus has opted for a direct operation model under the 'One LG Solution' approach without creating a separate entity. KT has chosen a hybrid model, keeping its existing cloud data center business under KT Cloud while separating AIDC for direct management by its headquarters.
The choices made by the three companies reflect differing financial strategies. SKT can leverage project financing and attract financial investors through SK Hyper, allowing for easier external funding and distribution of financial burdens. However, increased external investment may dilute ownership and raise issues related to internal transactions with the parent company.
LG Uplus benefits from capital efficiency and synergy by utilizing the cooling, power, and network capabilities of its group affiliates without a separate entity. Recently, CFO Yeom Young-hee stated during a conference call that AIDC investments would be executed within the range of earnings before interest, taxes, depreciation, and amortization (EBITDA) without external funding. However, this approach means that the investment burden will directly impact the parent company's financial statements, and options for external funding channels are relatively limited.
KT, also investing directly without creating a new entity, faces similar financial burdens on its main balance sheet. It is reportedly negotiating with overseas investors for significant funding. By separating the AIDC business from its cloud data center operations, KT aims to focus its resources solely on AIDC.
Despite their differing business directions, all three companies share a common goal: to cultivate AIDC as a new revenue source amid stagnation in their core telecom growth. The government has also launched the 'AI Data Center Alliance,' involving the Ministry of Trade, Industry and Energy and the Ministry of Science and ICT, aiming to develop AIDC as a national strategic industry with a target of 18.4 GW by 2035.
The competition among the telecom companies, aligned with government-led mega-projects, is expected to become a major topic in the telecom industry in the second half of the year.
With the domestic telecom market stagnating for over a decade, the competitive focus has shifted to AIDC. In the second quarter, SKT reported AIDC revenue of 136.2 billion won, a 92.5% increase from the previous year, marking the fastest growth among its business divisions. During the same period, SKT's overall operating profit rose 67.3% to 566 billion won.
LG Uplus also saw its AIDC revenue grow to 124.1 billion won, up 28.9% year-on-year, driven by the expansion of its colocation business, contributing to an 8.6% increase in corporate infrastructure revenue to 464.4 billion won, achieving the highest quarterly operating profit in its history. KT has yet to announce its second-quarter results, but CEO Park Yun-young stated during a meeting marking his 100th day in office that the company plans to invest 5 trillion won in AIDC over the next five years to secure a supply capacity of 1 GW nationwide.
* This article has been translated by AI.
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