1、M IdeaS.Korea Telecoms|Asia PacificRising competition gets us cautious near term time to take profits Morgan Stanley&Co.International plc,Seoul Branch+Seyon ParkEquity Analyst Seyon.P +82 2 399-4936 S.Korea Telecoms,Media&InternetAsia PacificIndustry ViewIn-Line Whats Changed SK Telecom Co Ltd(01767

2、0.KS)FromToRatingOverweightEqual-weightPrice TargetW60,000W58,000LG Uplus Corp(032640.KS)FromToRatingEqual-weight UnderweightPrice TargetW11,500W12,000With SKT intent on regaining some of its subs,and with handset subsidy caps removed,we believe the stage is set for intense competition for the next

3、couple of quarters.We hence downgrade SKT and LGU,leaving KT as our sole OW.The stage is getting set for a marketing battle:With SKT having lost 600K subs during its subscriber acquisition suspension period,we believe the market leader will be keen to recoup some of its market share.At the same time

4、,neither KT nor LGU appears to be willing to give up their recent gains.This setup has coincided with the removal of the handset distribution reform bill last week,allowing operators to offer materially higher handset subsidies.We therefore foresee a period of intense competition playing out over th

5、e next couple of quarters.We cut our earnings estimates to reflect higher marketing spend for 2H25:We forecast aggregate marketing spend as a percentage of sales to increase by nearly three percentage points in 2H25(vs.1H25),and expect operating margins to be impacted for the next two years as opera

6、tors amortize the higher subsidies across the life of the contract.We therefore see risk to full year industry OP growth.Our base case assumes rational competition returns in 2026:This is because both KT and LGU are committed to their value-up initiatives,which we see limiting the companies from spe