LG Uplus: Initiating Coverage With No Moat and KRW 11,900 Fair Value Estimate

We initiate coverage on LG Uplus with a no-moat rating and a KRW 11,900 fair value estimate. As the third entrant into the Korean telecom market, LG Uplus has gradually taken market share in the mobile, broadband, and pay-TV markets, but remains in third position in market share terms in each market, with 20%-25% market share. Given the high-fixed-cost nature of telecommunications, this puts LG Uplus at a slight disadvantage compared with its peers, KT Corp and SK Telecom, who have benefited from first-mover advantage. Despite only having three operators, the Korean telecom market has proven to be very competitive, with each of the telecom companies generating average returns on invested capital below their cost of capital over the past 10 years. For this reason, we give LG Uplus a no-moat rating.