A new perspective is emerging that suggests Korean telecom companies might be significantly undervalued. This view reframes them from stable, slow-growth 'utilities' to owners of highly valuable digital infrastructure.
The core of the argument lies in a valuation mismatch. Korean telcos like KT, SK Telecom, and LG Uplus are currently valued at about 4 to 6 times their EV/EBITDA. This is a standard metric for mature, stable companies. However, they also own and operate Internet Data Centers (IDCs) and AI Data Centers (AIDCs). Pure-play data center companies and assets globally are being bought and sold at much higher multiples, often in the range of 15x to over 25x. The market, it seems, is lumping the high-growth, high-value data center business in with the slow-growth traditional telecom business.
So, why is this becoming a major topic now? Three key factors are driving this narrative. First, the AI revolution has triggered a massive spending spree. Hyperscalers—tech giants like Google, Amazon, and Microsoft—are projected to invest hundreds of billions of dollars in 2026 to build out the data center capacity needed to power AI. This creates a powerful and sustained demand for the very assets Korean telcos own.
Second, recent major deals have set clear, high-priced benchmarks. For example, KKR and Singtel's acquisition of ST Telemedia Global Data Centres in Asia provided a tangible example of the high valuations these assets command in the private market. These real-world transactions make the low valuation of Korean telcos' data center arms look even more pronounced.
Finally, the situation within Korea is also evolving. While rising industrial electricity costs present a challenge, the government is considering regulatory relief to accelerate the construction of new AI data centers. This policy support could help unlock development bottlenecks and make it easier for telcos to expand and monetize these assets.
Analysts are using a SOTP (Sum-of-the-Parts) approach to illustrate this potential. The logic is simple: if you value the data center portion of the business separately at a higher multiple, the company's total implied value increases significantly. Even if data centers are just 8% of a telco's earnings, revaluing that small slice from 4x to 15x or 20x could lift the company's overall valuation by 10% to 30%. This highlights the hidden value waiting to be unlocked.
- Glossary -
- EV/EBITDA: Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization. A ratio used to determine a company's value, often used to compare it with its peers.
- Hyperscaler: A large-scale cloud service provider that can offer massive computing resources, such as Google, Amazon Web Services (AWS), and Microsoft Azure.
- SOTP (Sum-of-the-Parts): A valuation method that determines a company's worth by valuing its different business divisions separately and adding them together.