[Concall] SKT "Investing Approximately 300 Billion KRW This Year in Profitable AI Areas"

SKT Q2 Earnings Conference Call on the 6th
"Collaborating and Investing with Domestic and International Companies"
Emphasizing 'Edge AI' as a Viable AI Business

On the 6th, SK Telecom held a Q2 earnings conference call and announced that the total amount the company has invested in the artificial intelligence (AI) sector this year is expected to be around 300 billion KRW.

In response to a question about how the company plans to use the profits secured, given that strong performance is also expected in Q3 and Q4, Kim Yang-seop, SKT Chief Financial Officer (CFO), stated, "We will thoroughly focus our investments on areas within the AI pyramid framework that can generate revenue." He added, "Including the SGH investment made this year (USD 200 million, approximately 280 billion KRW), the total investment is expected to be around 300 billion KRW."

According to SKT, after excluding frequency interest, recurring expenses, and capital expenditures (CAPEX) from earnings before interest, taxes, depreciation, and amortization (EBITDA), the company generates a cash flow of approximately 1 trillion KRW.

CFO Kim said, "Over the past two years, we have invested in companies such as Anthropic, Lambda, and Perplexity, which are involved in large language models (LLM), AI data centers (DC), and personal AI assistants (PAA) that can be monetized through AI." He added, "We are conducting appropriate small-scale investments in necessary elements through collaborations with domestic and international companies."

He continued, "There have been questions about why SKT, not SK Square, is making these investments, but we are choosing to focus and concentrate in order to dramatically enhance the fundamental competitiveness of a telecom company and to create new revenue streams and improve performance."

He also mentioned efforts to use cash flow for shareholder returns. CFO Kim said, "The dividend payout ratio exceeds 70%, and the dividend yield is around 7%. In 2021 and 2023, we also conducted large-scale share buybacks." He added, "While maintaining stable dividends, we will consider, in the mid to long term, profits corresponding to any meaningful performance improvements." He stated that cash flow will also be used in a balanced manner to improve the financial structure.

When asked about which AI business SKT sees as having the most business potential, he emphasized "Edge AI." Edge AI is an AI technology that processes and analyzes data on the device itself.

Ryu Jeong-hwan, head of infrastructure strategy and technology, explained, "Large-scale training has been conducted on centralized AI PCs, but recently, distributed forms of AI computing such as on-device AI have been spreading." He added, "However, there are constraints such as battery life and performance, which led to the emergence of Edge AI that can compensate for these, and it is expected to be a good opportunity for telecom operators."

Ryu further explained, "Edge AI uses telecom AI equipment to provide AI computing and communication services." He said, "AI service training is expected to be handled at AI data centers (AIDC), while inference processing can be done on Edge AI."

He also hinted at the possibility of paid subscriptions for the A. (A-dot) service, which is provided as a B2C AI service. CFO Kim said, "We are continuously developing the service to enhance personal assistant functions." He added, "Monetization through subscriptions has become a universal model for global AI services, and we believe this will be an area where we can excel."

Regarding the significance of the USD 10 million (approximately 13.8 billion KRW) investment in the U.S.-based generative AI company Perplexity, Lee Jae-shin, head of AI growth strategy, said, "The combination of both companies is expected to provide an optimal AI search environment." He added, "It will also be integrated into the revamped A. service." Furthermore, he said, "Perplexity Pro, the paid AI search service, will be offered free of charge for one year exclusively to domestic telecom customers."

SKT announced that its consolidated operating profit for Q2 this year was 537.5 billion KRW, a 16.0% increase compared to the same period last year. Revenue was 4.4224 trillion KRW, up 2.7% year-on-year. Net profit recorded 350.2 billion KRW. On a separate basis, revenue was 3.1915 trillion KRW, and operating profit and net profit were 450.4 billion KRW and 280.3 billion KRW, respectively.

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