SK Telecom Co., Ltd.

Good afternoon. I am Dong Hee Joon, IRO of SK Telecom. Thank you for taking the time amid your busy schedule to attend SK Telecom CEO Investor Day. 2022 marks a new starting line for SK Telecom. Today, the senior management of SK Telecom, led by Mr. Yoo Young Sang, the company's CEO, will share the vision. and Strategy of SK 2.0 with Analysts and Investors. First, Mr. Yoo will begin by presenting SK Telecom's new vision and its details, which will be followed by a Q&A session. Simultaneous interpretation will be provided for the CEO presentation. Consecutive interpretation will be provided for the following Q&A session. Now, I will give the floor to Mr. Yoo, CEO of SK Telecom. Hello, everyone.

We had the spinoff in November last year, and it is my first time meeting with investors. We wished to arrange such a meeting earlier than today, but there was COVID situation, and so we are holding this event online. I'd like to ask for your understanding. Today marks the 101st day since the spinoff, and for the past 100 days, As the CEO of SK Telecom 2.0, I have had many thoughts, and I'd like to share with you my thoughts with you in detail. We've been listening to the expectations and ideas from the shareholders regarding the SKT after the spinoff. There are many investors and shareholders who are expecting stable dividend income based on earnings growth, but at the same time, many shareholders are looking for new growth opportunities By utilizing new growth momentum. And as the CEO of SK Telecom 2.0, I'd like to pursue two targets of stability and growth at the same time. And to do so, SK Telecom has reorganized its businesses and resource operations. SK Telecom will continue to generate stable income from MNO, mobile and fixed business, which is the core business of SK Telecom. And at the same time, we're going to pursue new growth In the areas of media, enterprise, AI verse, and connected intelligence. In the following chapters, I'm going to share with you some more specific strategies. But the reason for this reorganization is to basically overcome the limitations of binary operation between the existing business and the growth businesses. It means that while we pursue growth businesses in the five We will utilize our entire resources so that there will be no loss coming after the spinoff. And we're going to focus on the three management pillars of customer services and technology and utilize our manpower and resources in these three areas. In other words, we're going to focus on the 5x3 matrix. When you look at the current situation, mobile and fixed revenue accounts for 82% and the growth rate is 3%. The growth businesses account for 18% of the revenue and the growth rate is 15%. The reason for this reorganization of the business into five business groups is based on the following background. When you look at the corporate value of a company that has a high share of the existing business, the existing business multiple would be applied for corporate valuation. This means that growth potential of the growth businesses is not well reflected in the valuation. As for the media and enterprise business, they need to be applied with a different multiple and different matrix compared to the mobile and fixed business. And also, subscription, metaverse, and agent-based AI-verse services require a different approach in valuation. In this regard, we will continue to share with the shareholders specific indicators and progress of the five business groups in a clear manner and on a regular basis so that the corporate value of the growth businesses will be recognized properly in the market. Now, I am going to give you some specific business strategies of the five business groups. First of all, let me talk about the mobile and fixed business. When you think about the key driver of MNO business, as you may know very well, it is 5G. In January, the SK Telecom 5G subscribers reached 10 million, By 2025, we believe that the additional 5G subscriber growth of 8 million is possible, and the wireless ARPU will continue to grow, and as a result, the MNO revenue growth trend will continue for many years to come. In addition, we're building the 5G networks together with the other two telcos, which will Provide us with capex savings. And in doing so, we will be able to expand the 5G coverage earlier than scheduled. And as for marketing and competition, it's not going to be mainly market share competition, but mainly competition based on providing value to customers. And overall, the market stability has been maintained. In addition, we're going to achieve operational excellency by utilizing the network efficiency and online analytics As for the fixed line business, we are going to be able to enjoy a sustained growth of subscribers as the number of single households is increasing and there is a growing demand for the second TVs. And as we have the one team system between the SK Telecom and SK Broadband, we will be able to maintain number one market share in terms of subscriber net ads. Therefore, we are going to be able to enjoy a sustained growth of subscribers. The fixed-line business revenue is going to be record-breaking each year. And at the same time, by designing and offering new customer opportunities and experiences, we'll be able to retain customers in the long run. Next is the media business. We have more than 10 million pay TV subscribers. We have more than 25 million mobile subscribers. By utilizing these subscriber bases, we're going to expand to the value chain, including content, commerce, and advertising. First of all, when we look at the content business, we will continue to expand collaboration in the original content lineup by working with Wave, BTV, and Channel S, and we're going to expand the number of channels. Moving on to SK STOA. In just two years, the GMB recorded 1.3 trillion won, and SK Store has become number one domestic tea commerce player. Currently, we're connecting with tea deals where GMB is about 100 billion won. We're going to develop growth strategies. And we will capitalize on the paid POCs, so wireless PV of more than 100 million views, and A fixed PV of more than 60 million views of SK Telecom. By utilizing a wireless and wired POC, we're going to build advertising business based on the new AI services. Now, next is the enterprise business. The data center business has huge growth potential because of the increasing demand and supply shortage. We'll not only expand capacity, but also we will expand into high value-added Business models including the HDC and MMR platforms based on 5G. And we're going to expand collaboration with the global CSPs to explore global expansion opportunities. By 2025, we plan to increase the data center revenue to more than 1 trillion won. Next, the cloud market is continuing to grow, and we are looking for new business opportunities in the areas of 5G MEC and MSP. In 2021, the cloud revenue was 64 billion won, and the 5G MEC, which was jointly launched with AWS, has produced more than 30 use cases such as AR and VR use cases. In addition, we're going to utilize BestBin Global, where we made equity investment to look for global expansion opportunities. Now, we are seeing new business opportunities in the era of the 5G, together with AI and IoT. Vision AI, Language AI, Data Analytics Platform, and 5G and IoT networks are combined. And these will lead to vertical integrations and expansions in smart factory, finance, security, and Hospital Services.

Next, I will go on to our service business, which is AIverse. First, T-Universe was launched September last year, and it has been well received by both our customers and the market. Last year, our subscription GMB surpassed $350 billion, and the 11th Street GMB The 11th Street oversees direct purchase GMB when over 100 billion Korean won. In terms of customer profile, we see higher contribution of the 20s and 40s age group and also subscription via contactless channels. This year, first, we will work on expanding the product portfolio of Amazon Global Store. Second, we will be increasing subscription partnerships and packages. In July last year, our MAU went over 1.13 million, Duration was around 61 minutes, which are meaningful results. Recently, we have been receiving more than 1,500 partnership requests, and we believe that this is recognition of our metaverse as a new communication platform. This year, we will make effort to build open content platform, second, establish economic system including NFT, and third, venturing into global markets. In 2025, we plan to secure more than 30 million global MAU. For the AI agent, we are targeting to create an unprecedented new service based on characters and also based on conversational AI service. In Q2 this year, we are planning to launch new services and therefore we are currently conducting product development and tests. Lastly, I will be talking about how we are preparing to develop the growth engines for the next decade. Telecom has continued to evolve, and also technology such as AI, robots, mobility will also continue to develop, which will lead to the emergence of a diverse array of devices. This means that We will have to see what kind of devices will appear after the smartphone, and SKT will focus on how to provide additional services other than connection. We believe that in this respect, connected intelligence is a role that SKT can play because it is adding intelligence to our existing strengths. Our first business is UAM. UAM is a newly emerging urban air mobility service. There are some uncertainties surrounding its demand, regulation, and technology. But for Korea, we believe that there is visibility in terms of business license and commercialization in 2025. We are working together with Hanwha Systems, Korea Airport Corporation, and our recently announced partnership with Joby. And we believe that we will be able to offer UAM services and become a total service provider in this area. We will continue to explore new growth engines for the next decade in areas where SKT can leverage key strengths other than UAM. Next, I will go over our shareholder return policy. In 2021, we implemented the spin-off. We also retired 2 trillion won of treasury stock, we introduced quarterly dividends, and also implemented 5-2-1 stock split. We have been continuously implementing shareholder-friendly policies and this trend should continue this year. Our pre-spin-off total dividend level should be maintained in 2022 as well and we will also maintain our dividend guideline that has been already announced to the market. Lastly, I will talk about the future envisioned by SK Telecom. We believe that the robust growth of the five business groups will enable us to achieve 23 trillion KRW in terms of revenue in 2025 from the current 16.7 trillion. The growth businesses should contribute 36% in 2025 from the 18% of current levels SKT is now moving on from connecting people. We are transitioning into a company that expands time and space for customers with technologies such as AI, metaverse, and universes. We are shifting from distance to dimension. We will be continuously identifying new businesses that can boost the value of customers and shareholders by leveraging our key strengths. We will be achieving both targets of stability and growth. Thank you. This will conclude our presentation. We will move on to the Q&A session.