Seeking Alpha • Oct 20

SK Telecom: Multiple Positives

Summary SK Telecom's core mobile business should deliver better profit margins going forward, as industry competition isn't as intense now in view of the high 5G penetration rate in South Korea. The company's non-mobile businesses such as subscription services and data centers have significant growth potential in the long run. SKM's valuations are appealing in absolute and historical terms. I assign a Buy rating to SK Telecom, considering the multiple positives like expectations of improved profitability for the mobile business, the non-mobile businesses' growth prospects, and attractive valuations. Elevator Pitch My investment rating for SK Telecom Co., Ltd's (SKM) [017670:KS] stock is a Buy. In my previous August 16, 2021 update for SKM, I reviewed SK Telecom's Q2 2022 financial performance. With this latest update, I discuss about the multiple positives for SK Telecom. Firstly, profit margins for SK Telecom's mobile business should expand going forward as competition between SKM and its rivals becomes less intense. Secondly, SKM is actively exploring new growth opportunities outside of its core mobile business, with its data centers and subscription services expected to be key drivers for the future. Thirdly, SK Telecom's low single-digit forward EV/EBITDA valuation multiple isn't expensive by any stretch. These positives support my Buy rating for SK Telecom. Benign Competition In Korean Mobile Market There are a number of indicators suggesting that the current level of competition in the wireless industry in South Korea is not as intense as it was in the past. SK Telecom's most recent quarterly results were good in absolute terms and also beat market expectations. Revenue for the company rose by +4% YoY to KRW4,290 billion in the second quarter of 2022, while its Q2 2022 operating income of KRW460 billion represented a +16% growth on a YoY basis. SKM's actual second-quarter operating profit was +13% higher than the sell-side's consensus operating income projection of KRW407 billion as per S&P Capital IQ data. Notably, SKM's mobile segment did well with the company's mobile service revenue up by +2% YoY to KRW2,616 billion in Q2 2022 as indicated in its second-quarter earnings presentation. The expansion in mobile service revenue for SK Telecom in the recent quarter was driven by a +2.9% YoY growth in the number of mobile subscribers and a +0.7% increase in ARPU (Average Revenue Per User). SK Telecom achieved good progress in selling its 5G mobile subscription plans. The percentage of 5G mobile plans subscribers as a proportion of SKM's mobile subscriber base increased from 32% in Q2 2021 and 46% in Q1 2022 to 50% for Q2 2022. It is critical to note that the good performance of SK Telecom's mobile business didn't come at the expense of a substantial spike in marketing expenses. In actual fact, SK Telecom's marketing costs declined by -6% YoY from KRW805 billion in Q2 2021 to KRW758 billion in Q2 2022. In QoQ terms, marketing expenses for SKM rose by a mere +2% in the most recent quarter. At the company's Q2 2022 earnings briefing, SK Telecom's management emphasized that "there is very low likelihood of competition heating up again to attract 5G subscribers" in view of the fact that "the 5G market (in South Korea) is becoming more mature." According to information provided by research firm Omdia, South Korea's 5G mobile penetration rate was as high as 32.7% as of end-August 2022, which is the highest among countries around the world. Therefore, it is reasonable to assume that the future profitability of SK Telecom's mobile business will be decent, as the company won't have to ramp up marketing expenses in light of more benign competition. Growth Potential Of Non-Mobile Businesses Looking beyond SKM's core mobile business, SK Telecom's non-mobile businesses have significant room for growth. In particular, I will focus on the company's subscription services and data centers businesses. On August 25, 2021, SK Telecom issued a press release announcing that it launched "a new brand T Universe" to sell "subscription packages that offer differentiated benefits including free international delivery for products on Amazon (AMZN) Global Store, 11st (name of Korean e-commerce platform) points and Google (GOOG) (GOOGL) One." T Universe has been a success for SK Telecom based on the initial metrics. As of June 30, 2022, T Universe boasted 1.2 million subscribers and a GMV (Gross Merchandise Value) of KRW260 billion based on the company's disclosures at its second quarter investor call. This is just the tip of the iceberg when it comes to assessing T Universe's growth potential in the long run. SKM had highlighted in its late-August 2021 media release that it sees T Universe' GMV and subscriber base expanding to KRW8 trillion and 36 million, respectively, in 2025. Separately, SK Telecom's data centers business is another key area of growth for the company. Revenue for SKM's data centers business grew by a very strong +37% YoY from KRW27.0 billion in the second quarter of 2021 to KRW37.1 billion in the most recent quarter. SK Telecom's Q2 2022 data center sales of KRW37.1 billion are equivalent to an annualized revenue of KRW148.4 billion.

Seeking Alpha • Aug 08

SK Telecom: Looking Beyond The Traditional Business Model

5G is reversing the declining ARPU trend. But intense competition and the lack of killer apps hinder 5G from significantly increasing ARPU. Telcos, including SKT, look beyond the traditional business model to ramp up their growth trajectory. While it is too early to judge, the numbers are showing good signs so far. SKT produces higher EBITDA margins than its competitors and generates consistent free cash flows. However, from a valuation perspective, KT seems a better choice. Investment Thesis Although 5G started to reverse the declining ARPU trend, intense competition and the lack of killer apps will hinder it from significantly impacting ARPU. Like other telcos, SK Telecom Co., Ltd looks beyond the traditional business model to ramp up its growth trajectory, and the numbers show a glimpse of promise. Lastly, SK Telecom operates at higher EBITDA margins than its competitors, generates consistent free cash flows, and has low debt. But KT Corporation’s EV/EBITDA is much lower than SKT’s. Ownership Structure SK Telecom Co., Ltd (SKM) is a Korean wireless telecommunication service provider whose operations go back to 1984. SK Inc., the ultimate controlling entity, owns 30% of SK Telecom (we will call it SKT from here on). SKT's Ownership Structure (Company) In 2021, SKT completed the horizontal spinoff of SK Square, which engages in semiconductor and ICT businesses. As additional information, SK Square is now the major shareholder of SK Hynix following the spinoff, replacing SKT. SK Telecom 2.0 As their growth is stalling, telcos are looking beyond the traditional business model to reignite their growth trajectory, including SKT. SKT redefined itself as an aspiring AI-based service company–the so-called SK Telecom 2.0. As a result, SKT divides its business into five groups: Mobile & Fixed, which remains a core business, and four segments with high growth potential: Media, Enterprise, AIVERSE, and Connected Intelligence. SK Telecom 2.0 (Company) Strategies (Company) SKT's Growth Trajectory (Company) Industry Analysis: 5G To Reverse Declining ARPU SKT directly competes with KT Corporation (NYSE:KT) and LG U+. KT is the biggest operator in terms of revenue. But SKT leads in the mobile service market. The industry is highly regulated by the Korea Communications Commission and the Ministry of Science and ICT ((MSIT)). Previously, SKT, as the dominant network service provider, was required to obtain approval from the MSIT regarding its rates and terms of services. The MSIT could order changes if those rates were “significantly unreasonable or against public policy.” After the Telecommunications Business Act amendment, the MSIT can object to rates or terms submitted by SKT within fifteen days. Moreover, the MSIT can take proactive measures to promote competition. For example, by passing regulatory criteria, any company can become a network service provider without a separate license requirement. Furthermore, in April last year, the MSIT allowed ten MVNOs to offer more affordable 5G mobile data plans after the ICT ministry granted MVNOs the flexibility to independently design their 5G data plans, according to the Yonhap news agency. The emergence of MVNOs is a double-edged sword, in our view. On the other hand, MVNOs, which lease bandwidth capacity from MNOs, can help drive MNOs' revenues. On the other hand, MVNOs offer lower rates than MNOs, intensifying competition and thus impacting profitability. For example, Figure 5 shows that SKT leads in the wireless subscribers' market share. But it was not until recent years that the share started to deteriorate. Nevertheless, after separating MNO and MVNO subscribers, we found that LG U+ showed incredible growth thanks to expanding MVNO subscriber base. MNO + MVNO Market Share (Companies, Vektor Research) MVNO Subs Market Share (Companies, Vektor Research) To gain a clearer picture of the industry, we divided the time frame into three periods: the emergence of 4G LTE (2010-2014), industry stagnation (2014-2018), and the 5G age (2018-present). During the first period, the wireless industry’s aggregate wireless service revenue grew 3% annually thanks to the emergence of 4G LTE technology in 2011. In the subsequent years (2014-2018), however, the growth rate declined by 0.6% per year. Finally, as we enter the 5G era, the revenue growth started to pick up once again (~2% per year). Aggregate Wireless Service Revenue Growth (Companies, Vektor Research) We believe that the share price reflects the trend. SKT’s share price bottomed out in mid-2012 before it reached its highest in late 2014. Since then, the share price had stalled, and it picked up again as we entered the 5G era. SKT and KT Share Price (Yahoo Finance) Why did this happen? The mobile & fixed industry drivers are subscriber base growth and ARPU. First, smartphones began to gain traction in the last decade's first half, primarily supported by 4G LTE technology in 2011. Since then, the penetration rate began to stagnate (see Figure 9). Second, telco ARPU declined because of the rising popularity of OTT services overshadowing many operators' services, such as voice calls. Moreover, competition from MVNOs lowered prices. Penetration Rate (Company, the Ministry of Interior and Safety) ARPU (in KRW) (Companies) But in the third period, revenue growth started to pick up, albeit only slightly. Although 5G was introduced in 2019, such technology did not immediately lift ARPU. In the early days of 5G, SKT encouraged widespread adoption by offering discounted data plans ranging from US$49 per month to US$66 per month with a data cap and from US$78 per month to US$110 per month with unlimited data. Other operators also introduced promotions. Aggressive rollout results in high 5G adoption: over a third of aggregate wireless subscribers were 5G users in 1Q22. GSMA estimates that 5G will represent 73% of mobile connections by 2025. And the trend is likely to continue. For example, SKT plans to offer more affordable plans as low as KRW40,000 per month (~US$30.6 per month). To make matters more appealing, people are moving to premium plans. For instance, SKT reported a 0.6% annual increase in ARPU from 1Q21 to 1Q22, trailing KT that recorded 3.7% (Y/Y) gain. By contrast, LG U+, posted an ARPU decline of 4.2% (Y/Y). 5G Subs as a % of Wireless Subs (Companies) Although 5G has not yet significantly impacted operators because of the lack of the so-called killer apps, it has started reversing the declining ARPU trend. Therefore, who holds the upper hand in the 5G competitive landscape? No Significant Competitive Advantage Spectrum holdings are crucial for operators to gain a competitive advantage. In the US, for example, T-Mobile US (NASDAQ:TMUS) managed to drive its subscriber growth by deploying its extensive mid-band spectrum early. But it was not the case in the Korean telecom industry. In June 2018, SKT and KT acquired 100 MHz in the 3.5 GHz band, while LG U+ won 80 MHz. Last month, the ICT ministry announced that LG U+ secured additional 20 MHz of spectrum in the 3.4-3.42 GHz band despite complaints from its competitors. Moreover, each of the three operators also obtained 800 MHz in the 28 GHz band. Research by OpenSignal suggests that SKT led the pack in 5G availability and 5G download speeds, while RootMetrics, which measured performance by city, found that LG U+ won in some areas. Yet, despite the difference in methodologies, the result might prove our hypothesis: the difference in performance between all three operators is not that much, indicating no significant competitive advantage. Yet, this was not the case in the US. 5G Availability by OpenSignal (OpenSignal) 5G Availability by RootMetrics (RootMetrics) 5G Download Speeds by OpenSignal (Mbps) (OpenSignal) 5G Median Download Speeds by RootMetrics (Mbps) (RootMetrics) All in all, we believe that operators have no significant competitive advantage in the mobile market. Indeed, an aggressive 5G rollout and more people moving to premium plans will likely continue to reverse the declining ARPU trend. But it is unlikely to drive operators’ revenue growth to a large extent partly because of competitive pressures and the lack of killer apps. GSMA also estimates that developed APAC mobile revenue growth to grow 2.9% in 2022 before slowing down to 1% in 2025. Growth Story: Leveraging 5G to Go Beyond the Traditional Business Model As growth in the mobile market is stalling, telcos look beyond a traditional business model to help drive their growth trajectory and are making moves. For example, early this year, KT acquired a stake in Shinhan Financial Group amounting to KRW437.5 billion to “promote digital platform technology based future growth DX business cooperation.” Moreover, KT decided to integrate its OTT platforms with CJ ENM. When asked regarding M&A plans, SKT CEO Young Sang Ryu said that the company plans to acquire technology companies that focus on AI and metaverse. Furthermore, SKT invested KRW10 billion in CMES, an AI robot-based logistics business, as a part of its Connected Intelligence business. In addition, SKT signed a memorandum of understanding with Equinix (NASDAQ:EQIX) to “to expand the quantum business including ‘QKD as a Service ((QaaS))’ in both Korean and overseas markets.” As we advance, SKT expects media, enterprise, and AIVERSE to grow 30% per year until 2025, contributing more than a third of SKT’s revenue. SKT 2.0 Mission (Company) And the numbers look promising. For instance, SKT’s 1Q22 data center revenue grew 35% (Y/Y), and the cloud business increased by a whopping 229% (Y/Y) after the Gasan and Siksa data centers were opened in July last year. As it stands, the company is developing other data centers in the Seoul metropolitan area with the size of 80MW (scheduled to operate in 2026), as mentioned during the 1Q22 earnings call. Moreover, SKT said it would build four data center buildings by 2024 and 12 more by 2029. Data Center and Cloud Revenues (in KRW Billion) (Companies) SKT's Data Center Ambition (Company) AIVERSE includes subscriptions and the metaverse business. In September last year, SKT unveiled T Universe, a subscription-based service that bundles third-party services, claiming to have generated a GMV of KRW350 billion in 2021. By leveraging AI and digital transformation, SKT seeks to offer an “advanced online-offline subscription commerce platform” that specifically caters to customers’ needs in the future. SKT aims to reach 36 million T Universe subscribers by 2025, with an annual GMV of KRW8 trillion. SKT’s metaverse service, ifland, showed incredible growth in monthly active user ((MAU)), which stood at 1.35 million compared with only 280 thousand less than a year before. The management believes that the AIVERSE business will generate KRW2 trillion by 2025, up from KRW200 billion in 2021. Moreover, AIVERSE does not require massive Capex, while offering massive potential growth. While it is too early to say whether such ambition will materialize, numbers are showing good signs. Financial Analysis Figure 19 shows that SKT has declined 16% since the beginning of the year. Share Price Change (Yahoo Finance) Figure 20 shows that SKT and KT’s revenue growth picked up in the last few quarters. Please note that SKT’s quarterly revenues in 2021 excluded the spin-off business. Thus, we see declines in revenue. In reality, SKT’s revenue grew 4% (Y/Y) in 2021, just as KT did in the period. Revenue Growth (Y/Y) (Companies) Yet, SKT has produced EBITDA margins higher than its competitors. After the horizon spin-off, SKT’s EBITDA margins were up from 29%-30% to 31%-32%. EBITDA Margin (Companies) Moreover, balance sheet-wise, SKT and KT are on the safe side, although the former had an edge. Net Debt to EBITDA (x) (Companies, Vektor Research) SKT’s ROAE was around 7% after the spin-off. With a three-year average of ~6%, SKT’s ROAE is far trailing other incumbents in their respective industries, such as Verizon (NYSE:VZ) at 28% and Telkom Indonesia (NYSE:TLK) at 21%.

Puntuación del snowflake
Valoración	3/6
Crecimiento futuro	1/6
Rendimiento pasado	1/6
Salud financiera	3/6
Dividendos	4/6

Precios históricos de las acciones
Precio actual de la acción	₩35.90
Máximo en las últimas 52 semanas	₩47.18
Mínimo de 52 semanas	₩19.66
Beta	0.71
Cambio en 1 mes	-10.90%
Variación en 3 meses	7.32%
Cambio de 1 año	63.55%
Variación en 3 años	70.22%
Variación en 5 años	-26.44%
Variación desde la OPV	44.40%

	SKM	US Wireless Telecom	Mercado US
7D	-1.2%	-7.2%	-0.1%
1Y	63.6%	-24.2%	11.9%

SKM volatility
SKM Average Weekly Movement	7.6%
Wireless Telecom Industry Average Movement	5.8%
Market Average Movement	6.8%
10% most volatile stocks in US Market	15.1%
10% least volatile stocks in US Market	2.9%

Estadísticas fundamentales de SKM
Capitalización bursátil	US$13.71b
Beneficios(TTM)	US$525.00m
Ingresos (TTM)	US$12.31b

Estadísticas clave de rentabilidad del último informe de resultados (TTM)
Cuenta de resultados (TTM) de SKM
Ingresos	₩17.06t
Coste de los ingresos	₩5.05t
Beneficio bruto	₩12.01t
Otros gastos	₩11.28t
Beneficios	₩727.56b

Beneficios por acción (BPA)	3.41k
Margen bruto	70.40%
Margen de beneficio neto	4.27%
Ratio deuda/patrimonio	56.6%

¿Cuándo hay que comprar SKM para recibir un próximo dividendo?
fechas de dividendos de SK Telecom
Fecha ex dividendo	Aug 31 2026
Fecha de pago de dividendos	Sep 24 2026
Días hasta ex dividendo	22 days
Días hasta la fecha de pago de dividendos	2 days

Datos	Última actualización (huso horario UTC)
Análisis de la empresa	2026/09/21 18:45
Precio de las acciones al final del día	2026/09/18 00:00
Beneficios	2026/06/30
Ingresos anuales	2025/12/31

SK Telecom (SKM) Resumen de Acciones

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Noticias y actualizaciones recientes

SK Telecom Co., Ltd. to Report Q2, 2026 Results on Aug 08, 2026

SK Telecom Co., Ltd. Announces Cash Dividends for the Second Quarter of 2026, Payable on September 17, 2026

SK Telecom: Reported KKR Investment In Data Center Draws Attention

SK Telecom Co., Ltd. (KOSE:A017670) agreed to acquire 0.62% stake in SK hynix NAND Product Solutions Corp. for KRW 397129.05 million.

SK Telecom Co., Ltd., Annual General Meeting, Mar 26, 2026

SK Telecom Co., Ltd. Announces Not Distributing Any Cash Dividends for the Third Quarter of 2025

Recent updates

SK Telecom Co., Ltd. to Report Q2, 2026 Results on Aug 08, 2026

SK Telecom Co., Ltd. Announces Cash Dividends for the Second Quarter of 2026, Payable on September 17, 2026

SK Telecom: Reported KKR Investment In Data Center Draws Attention

SK Telecom Co., Ltd. (KOSE:A017670) agreed to acquire 0.62% stake in SK hynix NAND Product Solutions Corp. for KRW 397129.05 million.

SK Telecom Co., Ltd., Annual General Meeting, Mar 26, 2026

SK Telecom Co., Ltd. Announces Not Distributing Any Cash Dividends for the Third Quarter of 2025

Sk Telecom Co., Ltd. Declares Dividend for the Second Quarter of 2025, Payable on September 17, 2025

SK Telecom Co., Ltd. Revises Earnings Guidance for the Fiscal Year 2025

SK Telecom Co., Ltd. Announces Resumption of New Subscriptions

SK Telecom Co., Ltd. Reports Impairment Loss on Property and Equipment and Intangible Assets for the First Quarter Ended March 31, 2025

IonQ, Inc. (NYSE:IONQ) completed the acquisition of an unknown majority stake in ID Quantique SA from SK Telecom Co., Ltd. (KOSE:A017670).

Sk Telecom Co., Ltd. Temporary Suspension of New Subscriptions

SK Telecom Is The Flight To Telecom Safety We Were Looking For

SK Telecom Co., Ltd., Annual General Meeting, Mar 26, 2025

IonQ, Inc. (NYSE:IONQ) reached a definitive agreement to acquire an unknown majority stake in ID Quantique SA from SK Telecom Co., Ltd. (KOSE:A017670) for approximately CHF 140 million.

SK Telecom Co., Ltd. Declares Annual Cash Dividend

Samkoo Fs Co. Ltd acquired SK Communications Co., Ltd. from SK Telecom Co., Ltd. (KOSE:A017670) for KRW 7.04 billion.

Update Of GPT-3 Based Services And Cash Flows Make SK Telecom Undervalued

SK Telecom Co., Ltd. (KOSE:A017670) agreed to acquire an additional 24.76% stake in SK Broadband Co., Ltd. from Taekwang Industrial Co., Ltd. (KOSE:A003240) and others for KRW 1.15 trillion.

SK Telecom Unveils 'Aster(A*), Its New Global AI Personal Agent at SK AI Summit 2024

SK Telecom Co.,Ltd Announces Quarterly Common Stock Dividend, Payable by No Later Than November 13, 2024

SK Telecom: Positive Signs Are Appearing

SK Telecom Co., Ltd. (KOSE:A017670) and Hana Financial Group Inc. (KOSE:A086790) acquired 35% stake in BitGo Korea.

SK Telecom: Top Dog In The Telecommunications Space

SK Telecom Launches AI-Powered Veterinary Diagnostic Assistance Service X Caliber in Australia

SK Telecom: Positive Takeaways From Annual General Meeting

SK Telecom Co., Ltd., Annual General Meeting, Mar 26, 2024

SK Telecom: Eyes On Q4 Earnings Beat And Korea Discount

SK Telecom Q3 Earnings: Core Business Still Struggling

SK Telecom Co., Ltd. Announces Quarterly Cash Dividend, Payable on No Later Than November 15, 2023

SK Telecom: Consider Both AI Investments And Dividends

SK Telecom Co., Ltd. (KOSE:A017670) acquired an unknown minority stake in Persona AI CO.,LTD.

SK Telecom Announces Delisting of ADRs from London Stock Exchange

SK Telecom Seems To Be Losing Focus On Its Core Business

SK Telecom Co., Ltd. Declares Quarterly Dividend, Payable No Later Than August 14, 2023

SK Telecom: Watch Share Repurchases And Metaverse Business

SK Telecom Announces Upcoming Delisting of ADRs Representing SKT Common Stock

SK Telecom Co., Ltd.(KOSE:A017670) dropped from FTSE All-World Index (USD)

SK Telecom Co., Ltd. to Report Q1, 2023 Results on May 10, 2023

SK Telecom reports Q4 results

SK Telecom: Concerns In The Short Term, But Business Remains Strong

SK Telecom GAAP EPS of $1059.00, revenue of $4.34B beats by $1.23B

SK Telecom: Multiple Positives

SK Telecom: Looking Beyond The Traditional Business Model

SK Telecom: 5G Growth Has Been Impressive, But Inflation Could Pose Obstacles

SK Telecom: 5G Driving Company Growth

SK Telecom: Decent Results With Proposed Spin-Off In The Spotlight

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