[Summary] SKT Ahead of Demerger... Both New Businesses and Core Operations Smiled

[Asia Economy Reporter Seulgina Cho] SK Telecom, preparing for a spin-off, showed growth across all business areas from its core mobile network operator (MNO) business in the second quarter to new business sectors such as media, commerce, and security. Despite the impact of COVID-19, the New ICT division, which has settled on a growth trajectory, continued double-digit growth for five consecutive quarters, while the MNO also benefited significantly from the expansion of 5G subscribers. As the proportion of 5G subscribers steadily increases, average revenue per user (ARPU) and wireless service revenue are rising together.

On the 11th, SK Telecom, the last of the three major domestic telecom companies to announce its earnings, reported consolidated second-quarter sales of KRW 4.8183 trillion and operating profit of KRW 396.6 billion. Compared to the same period last year, sales increased by 4.7% and operating profit by 10.8%. Net profit for the same period rose 84.0% year-on-year to KRW 795.7 billion, influenced by equity method gains from SK Hynix.

Yoon Poong-young, SK Telecom’s Chief Financial Officer (CFO), said during the afternoon conference call, "Despite the corporate governance restructuring, the business continued stable growth, showing increased profits across all business areas including MNO compared to both the same period last year and the previous quarter." He added, "We are also focusing on concretizing the visions of the two companies after the spin-off." SK Telecom officially announced the spin-off through a board resolution in June and is currently pursuing a spin-off into a surviving company based on telecommunications, artificial intelligence (AI), and digital infrastructure, and a newly established company specializing in semiconductor and ICT investments.

◆ New ICT Grows for 5 Consecutive Quarters... Strengthening 5G Leadership

SK Telecom’s strong second-quarter performance directly reflected the effects of new businesses. New ICT sales, including media, commerce, and security, reached KRW 1.5779 trillion, a 10.1% increase year-on-year. This marks five consecutive quarters of double-digit growth compared to the same period last year. The New ICT business’s share of total sales has steadily maintained around 31-32%, approaching one-third of total sales.

This growth is attributed to an increase in media subscribers, new security businesses such as home and parking security, and growth in commerce transaction volume. The media business recorded sales of KRW 997.1 billion, up 8.7% year-on-year, and operating profit of KRW 64.2 billion, up 4.9%, driven by the net increase in IPTV subscribers. SK Broadband achieved the highest net increase in IPTV subscribers in the first half of the year, and as of the end of the second quarter, its paid broadcasting subscribers expanded to 8.81 million.

The S&C business (converged security) recorded sales of KRW 369.8 billion, a 14.5% increase year-on-year, supported by steady growth in unmanned security and information security, as well as high growth in new businesses based on technological differentiation. The commerce business also achieved sales of KRW 211 billion, up 9.6% year-on-year, thanks to growth in the e-commerce market and efforts to differentiate delivery services. The opening of the Amazon Global Store is also scheduled soon.

The core mobile communications business also showed strong performance, solidifying its 5G leadership. As of the end of June, 5G subscribers reached 7.7 million, exceeding 30% of handset subscribers. The MNO segment successfully turned around last year, driven by the expansion of 5G subscribers and increased data usage. In the second quarter of this year, SK Telecom’s standalone MNO sales recorded KRW 3.0216 trillion, up 2.8% year-on-year and 1.4% quarter-on-quarter. MNO operating profit also rose 21.5% year-on-year and 6.9% quarter-on-quarter to KRW 328.4 billion.

Notably, SK Telecom took its first step toward popularizing the metaverse by launching a new metaverse platform, ifland, in July. Strengthening social community functions around ifland’s core features of ‘gathering’ and ‘communication,’ the company is focusing on expanding its user base and plans to develop the platform further by linking it with various services such as sports, commerce, and entertainment. Additionally, SK Telecom plans to launch a marketing platform that packages various high-usage services and connects subscription products with customers based on AI.

CFO Yoon said, "Subscription services, which will be another pillar of telecom growth, are in the final stages of preparation," adding, "We are planning various packaging products centered on benefits such as media and commerce, which will be unveiled by the end of August." He explained, "They will be offered at disruptive prices in basic and premium versions," and "The goal is to evolve into an AI-based digital platform." SK Telecom aims to reach 35 million subscribers nationwide by 2025, targeting not only its own customers but the entire population.

◆ New Dividend Policy Revealed Ahead of Spin-Off: "At Least KRW 10,000 Dividend This Year"

SK Telecom is also tasked with the important mission of completing the corporate split into a telecom company (surviving company) and a holding company (newly established company) this year. Initial public offerings (IPOs) of New ICT subsidiaries under the new investment company, including app market One Store, ADT Caps, 11st, and Wavve, are also anticipated. This is a time when company-wide capabilities must be concentrated.

After the spin-off, the surviving company SK Telecom will focus on discovering new growth engines in subscription services, metaverse (extended virtual world), and enterprise sectors based on core businesses such as 5G and home media. The newly established investment company aims to grow its current net asset value of KRW 26 trillion to KRW 75 trillion by 2025 through investments encompassing semiconductors, platforms, and high-growth future innovative technologies.

SK Telecom will finalize the spin-off at the shareholders’ meeting on October 12. Upon confirmation, the two companies will be established from the spin-off date of November 1. The split ratio between the surviving company and the new company is 6:4.

SK Telecom, which has promised to maximize shareholder value through the spin-off, also revealed a new dividend policy. The core of the policy is to determine the total dividend amount within 30-40% of the amount remaining after deducting capital expenditures (CapEx) from EBITDA based on the standalone performance of the surviving company after the spin-off.

During the conference call held that afternoon, many questions were raised about the new dividend policy. CFO Yoon said, "This year’s dividend will be maintained at a minimum of KRW 10,000," estimating it at KRW 700 billion to 800 billion annually. He also added, "We aim to improve the basis for dividend resources by up to 20-30% by 2023," and "Investors can expect dividend growth in the future."

SK Telecom stated, "While continuing growth in New ICT and MNO sectors, we will keep discovering new growth engines to maximize shareholder and corporate value," and "We will prepare thoroughly so that the spin-off becomes a starting point for greater growth of both the surviving and newly established companies."

This content was produced with the assistance of AI translation services.