5/12/2025

speaker
Jung Hae-Joon
Conference Call Host, SK Telecom

Hello, I am Jung Hae-Joon of SK Telecom. I will start the conference call for the 1st quarter of 2025. Today's conference call will briefly talk about the financial performance and business situation, and we will proceed in the order of Q&A. And I will tell you in advance that the content related to the future outlook can vary depending on the market, business environment, and various factors. Then, I will listen to Kim Yang-sub CFO.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Good afternoon. I am Hee-Joon Jung, IRO of SK Telecom. Let us begin the earnings conference call for the first quarter of 2025. Today, we will first deliver a presentation on the financial and business highlights followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors such as market and management situations. Let me now present our CFO.

speaker
Kim Yang-Soo
CFO, SK Telecom

Hello, I am SK Telecom CFO Kim Yang-Soo.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Good afternoon.

speaker
Kim Yang-Soo
CFO, SK Telecom

This is Yangseop Kim, CFO of SK Telecom. Good afternoon.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Before I start the earnings presentation, I understand that there are great concerns among investors regarding the cybersecurity incident that happened last month. A joint public-private investigation team is currently looking into possible causes and scope of the incident, and SK Telecom is doing its utmost to protect our customers from any damage or loss related to the recent incident.

speaker
Kim Yang-Soo
CFO, SK Telecom

At the moment of recognition of dementia, we have quarantined hacking equipment. The FDS, which is a non-normal certification blocking system, is operating at the highest level, and all SK Telecom customers who can now apply have been able to sign up for the U-SIN protection service. The FDS and U-SIN protection service's dual devices have the same effect as the U-SIN replacement. From Friday, the upgraded U-SIN protection service will be applied in order and will be available for roaming.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Immediately after detecting data leak, systems suspected of malware infection were isolated. Also, an enhanced fraud detection system is running at its maximum level to block suspicious authentication attempts. As of now, all the eligible SK Telecom customers have enrolled in USIM protection service. The dual layers of the FDS and USIM protection service bear the same effect of USIM replacement.

speaker
Kim Yang-Soo
CFO, SK Telecom

Starting from today, the upgraded UCIM protection service will be applied sequentially to provide protection during roaming as well.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

We are also looking for various ways to address the situation, including securing as many USIM chips as possible in the short span of time, along with the suspension of new subscriber sign-ups. We will keep the investors updated on matters related to the incident. Let me now report on the consolidated financial results for the first quarter of 2025.

speaker
Kim Yang-Soo
CFO, SK Telecom

매출은 4조 4,537억 원을 기록했습니다. 일부 자회사 매각 영향으로 전년 동기 대비 0.5% 감소하였습니다.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Consolidated revenue reported 4,453.7 billion won, down 0.5% year-over-year due to the sale of certain subsidiaries.

speaker
Kim Yang-Soo
CFO, SK Telecom

영업이익은 전년 동기 대비 13.8% 증가한 5,674억 원을 기록하였습니다. 5G 성숙기 진입에 따라 마케팅 비용과 감가상각비가 감소세를 지속하며 수익성 개선 흐름이 이어졌습니다.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Operating income posted 567.4 billion won, up 13.8% year-over-year. Profitability improved thanks to the decline in marketing and depreciation costs as the 5G market matures.

speaker
Kim Yang-Soo
CFO, SK Telecom

단기 순이익은 전전동기 대비 0.1% 감소한 3,616억 원을 기록하였습니다.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Net income posted 361.6 billion won down 0.1% year over year.

speaker
Kim Yang-Soo
CFO, SK Telecom

다음으로 사업별 성과에 대해 말씀드리겠습니다.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Next, let me report on business highlights.

speaker
Kim Yang-Soo
CFO, SK Telecom

유무선 통신 사업은 5G 및 초고속 인터넷 가입자의 꾸준한 증가세를 보였습니다.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Fixed and mobile business saw a continued increase in 5G and broadband subscribers.

speaker
Kim Yang-Soo
CFO, SK Telecom

AI business revenue grew 15.6% year-over-year, maintaining a growth momentum. AIDC business posted 102 billion won of revenue in the first quarter,

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

up 11.1% year-over-year. It is firmly established as a successful business with more than $100 billion of quarterly revenue. In the short term, we will quickly increase data center utilization rates while generating additional profit through services such as GPU as a service. In the mid to long run, we will prepare for hyperscale AIDC business.

speaker
Kim Yang-Soo
CFO, SK Telecom

The AIX business has recorded a sales of 45.2 billion won, which has grown by 27.2% compared to the previous year. While AI cloud sales are steadily increasing, AI B2B is contributing to actual growth through financial policy and AI marketing. A.B.G. is conducting a beta test and is planning to officially launch it in the first half of the year.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

AIX revenue was $45.2 billion, up 27.2% year-over-year. Along with the steady growth of AI cloud revenue, AI B2B business has contributed to earnings thanks to virtual consultation services and AI marketing services for financial institutions. ADAT Biz is conducting a beta test, and it's scheduled for an official launch in the first half of the year after further improving functionality.

speaker
Kim Yang-Soo
CFO, SK Telecom

Agenic AI wants to prove its businessability this year. ADOT, which has surpassed 9 million accumulated subscribers and strengthened its revenue base, is focusing on user convenience by adding Google Gemini and Line App to multi-LNM agents and focusing on user convenience. Aster, which has conducted open beta services in the U.S., aims to launch the official service in the second half of the year.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

In addition, we are determined to demonstrate business feasibility of agentic AI within this year. ADOT has strengthened the profit base with the cumulative subscribers surpassing 9 million in the first quarter. It is focusing on enhancing user convenience by adding Google Gemini and LinerPro to the multi-LLM agent. ASDR has completed an open beta service in the US and is preparing for an official launch in the second half of the year.

speaker
Kim Yang-Soo
CFO, SK Telecom

Let me now turn to shareholder returns.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

the Board of Directors resolved to set the first quarter DPS at 831 with the record date of May 31st. As a result of the amendments to the Articles of Incorporation approved at the AGM in March, the record date for quarterly cash dividends is designated after the dividend amount is determined in an effort to enhance predictability of cash dividends.

speaker
Kim Yang-Soo
CFO, SK Telecom

SK Telecom announced that I will look back on the business and management, and I will further strengthen my own competitiveness. Customers are a part of the company, and customer value management is ultimately based on corporate value and stock value management. By focusing all of the company's capabilities on customer protection, we will be able to maintain the trust of customers and investors in SK Telecom, who have been using it for more than 40 years.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

In light of the recent cybersecurity incident, SK Telecom will conduct a thorough and comprehensive review of the business management and further strengthen fundamental competitiveness. Customers are the foundation of the company, and customer value enhancement is ultimately linked to corporate value and shareholder value enhancement. We will mobilize all the resources within the company for customer protection, so that we can regain and uphold the trust of our customers and shareholders have placed in us for over 40 years.

speaker
Kim Yang-Soo
CFO, SK Telecom

Now, more than ever, we ask for your continued support and encouragement.

speaker
Jung Hae-Joon
Conference Call Host, SK Telecom

Thank you.

speaker
Moderator
Q&A Session Moderator

Now Q&A session will begin.

speaker
Operator
Conference Call Operator

Please press star 1, that is star and 1, if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2, that is star and 2 on your phone.

speaker
Moderator
Q&A Session Moderator

The first question will be provided by John Sop Kim from KB Securities.

speaker
John Sop Kim
Analyst, KB Securities

Please go ahead with your question. Thank you.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

I'm Kim Junseo from KB Securities. Thank you for the opportunity to ask you questions. I have two questions related to the recent cybersecurity incident. The first one is about customers switching to another mobile operators. I understand that the number of customers switching to other MNO operators has been increasing more than the historical level, so I'd like to understand the company's position and response measures. Secondly, you have recently decided to suspend new subscriber sign-ups related to the recent cybersecurity incident. I'd like to understand for how long the suspension will be maintained and what will be the potential impact of this decision on your revenue. And if you can answer these questions, it will help us understand the current situation. Thank you.

speaker
Kim Yang-Soo
CFO, SK Telecom

Thank you for the question. Regarding the two questions, I will answer them from the Marketing Strategy Department.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Thank you for your questions. And as for your two questions, Mr. Yoon Jae-woong, head of marketing strategy, will answer them.

speaker
Yoon Jae-woong
Head of Marketing Strategy, SK Telecom

Hello, I'm Yoon Jae-woong, head of marketing strategy. In the early days of the hacking incident, there was some confusion and dissatisfaction among the users of the U-SIM replacement or U-SIM protection services. In this process, the number of customers who moved to another company increased more than usual.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

I am Yoon Jae-woong, head of marketing strategy. In the beginning of this cybersecurity incident, it is true, yes, that there were some inconveniences and confusion due to the surge in customers demanding UCIM replacements or enrolling in UCIM protection service. And in this process, there was an increase in the number of customers who were switching to other networks.

speaker
Yoon Jae-woong
Head of Marketing Strategy, SK Telecom

We well understand that the customer base is the most valuable asset of SK Telecom and a foundation for medium to long-term profit generation.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Therefore, it will be inevitable that we have to bear some expenses to regain the trust of our customers and lock them in. Currently, we are doing everything we can for customer protection and market stability, and we will continue to closely monitor the market situation and respond accordingly. Moving on to your second question, against the backdrop of the recent cybersecurity incident, in accordance with the administrative guidance by the Ministry of Science and ICT, we have suspended new subscriber sign-ups from May 5th.

speaker
Yoon Jae-woong
Head of Marketing Strategy, SK Telecom

The new recruitment is not decided yet, but considering that the purpose of this action is to improve the shortage of U-SIM, U-SIM service has been 100% registered and upgraded to be able to use roaming customers from today. After mid-May, U-SIM supply will be stabilized and U-SIM redevelopment will be introduced, and the replacement process of U-SIM will be simplified, so replacement demand will be dealt with smoothly.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

As of now, it has not been decided whether and when we will be able to resume new sign-ups. However, the recent suspension was made to secure enough supply of USIMs for affected customers. And we have already 100% of eligible customers enrolled in the USIM protection service. and now the USIM protection service has been upgraded to provide protection for roaming customers. And starting from mid-May, we believe that we'll be able to get a stable supply of USIM, and we have introduced a USIM reset function and have simplified the process for eSIM replacement. So we will be able to handle the demand for USIM and eSIM replacement going forward smoothly, and then we will discuss when we will resume the new sign-up

speaker
Yoon Jae-woong
Head of Marketing Strategy, SK Telecom

together with the relevant government ministries on this matter.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Upon your question on potential impact of this decision on our revenue will very much depend on for how long we will have to suspend new subscriber sign-ups. And so we are doing our best to stabilize the market as quickly as possible. And we will voluntarily disclose to the investors and to the market when we finally decide to resume new sign-ups.

speaker
Jung Hae-Joon
Conference Call Host, SK Telecom

Next question, please.

speaker
Moderator
Q&A Session Moderator

The following question will be presented by Seung Hoon Lee from Uanta Securities.

speaker
Operator
Conference Call Operator

Please go ahead with your question.

speaker
Seung Hoon Lee
Analyst, Uanta Securities

Hello, I'm Seung Hoon Lee from Uanta Securities. This may be an extension of the previous question, but I'm curious about the overall financial impact of this accident. First of all, there are a lot of uncertainties, so it may be difficult to answer in detail, but I would like to ask you to answer so that we can get a sense of what to consider and consider from the perspective of our investors. Also, you maintained the same level as the previous year, but I would like to ask you to answer if this can affect the future of the stock market. Thank you.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

I am from Uanta Securities. I'd like to ask some questions that are rather follow-up questions to the previous questions. In short, I'd like to understand the overall financial impact of the recent cybersecurity incident on your earnings performance. I know that a lot of the factors have not been finalized, so there's a lot of uncertainty, but if you can guide us and provide us with some color on what factors and what situations and what factors that we need to consider as investors to understand potential financial impact. And moving on to your first quarter dividend amount, you decided to maintain it to the same level as the previous quarter. I'd like to understand if the recent incident will have any impact on your shareholder return policy.

speaker
Kim Yang-Soo
CFO, SK Telecom

Thank you.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Thank you for your questions. I would first like to address your question on the overall financial impact of the recent incident on our performance.

speaker
Kim Yang-Soo
CFO, SK Telecom

Thank you.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

I understand that the investors would like to very much know the potential impact, financial impact of the recent cybersecurity incident on our earnings performance. But at this point in time, we don't really have any specific details to share with you But what I can do is to cover some of the related areas and potential measures that may have some financial impact, and then I will be able to provide you with more details as progress is made regarding the investigations and also market situations.

speaker
Kim Yang-Soo
CFO, SK Telecom

First of all, the cost of replacing the U-SIM is $2,400,000, assuming that all of our customers can replace the U-SIM.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

First of all, as for USIM replacement, we are working based on the assumption that all 24 million customers may want to get their USIM replaced. So we're accelerating the shipment of USIMs as much as possible, and we're also developing financial plans accordingly.

speaker
Kim Yang-Soo
CFO, SK Telecom

And regarding any potential negative impact on our revenue, this

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

may be expected due to some mobile carrier change or suspension of new subscriber sign-ups. But the size of such impact is dependent on future telco switch trends and when we will be able to resume new subscriber sign-ups. So please understand that we will not be able to offer any specific numbers at this point.

speaker
Kim Yang-Soo
CFO, SK Telecom

And we can also think of potential costs such as overtime. Is this also possible? Also, additional potential costs such as administrative penalties may be considered, but whether such costs would be incurred

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

is, again, dependent on so many factors, including the results of the ongoing joint investigation led by the Minister of Science and ICT and investigation by the Personal Information Protection Commission, and the potential amounts are also difficult to estimate at this point in time.

speaker
Kim Yang-Soo
CFO, SK Telecom

Due to the initial accident, there will be no negative impact on the financial performance, but we will continue to provide the necessary resources for customer protection Negative financial impact due to the recent cybersecurity incident may be inevitable.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

However, we believe that it is crucial for us to put in all the available resources as quickly as possible to stabilize the market and regain trust from our customers. And this will be the best way in the long run to minimize any potential losses and recover our corporate value.

speaker
Kim Yang-Soo
CFO, SK Telecom

Moving on to your question on potential change to our shareholder return policy. We understand that market participants would like to know whether there will be any change to our shareholder return policy due to the recent incident.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Certain levels of financial impact would be inevitable related to the recent incident, but it is rather too early to estimate any potential financial impact with any certainty. So what I can say is that our basic principle of maintaining stable dividends for shareholder returns remains the same.

speaker
Jung Hae-Joon
Conference Call Host, SK Telecom

The next question will be presented by Soojin Kim from Mirai Asset Securities.

speaker
Operator
Conference Call Operator

Please go ahead with your question.

speaker
Soojin Kim
Analyst, Mirai Asset Securities

Hello. Thank you for the question. Regarding hacking, you mentioned it earlier, so I would like to ask you a business question. Thank you for the opportunity to ask questions.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Because questions were already asked regarding the recent cybersecurity incident, I'd like to ask a question on your business. situations and plans. For your AIDC business, it recorded a double-digit growth rate on a year-over-year basis, so I'd like to understand your future AIDC operation and expansion plans, and if you can give us some color on the profitability of AIDC business, it would be great. Thank you.

speaker
Kim Yang-Soo
CFO, SK Telecom

Thank you.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Thank you for your questions. As for your questions, Mr. Lee Hyun-woo, head of AIDC Development, will address them.

speaker
Lee Hyun-woo
Head of AIDC Development, SK Telecom

Yes, I'm Lee Hyun-woo, the head of AIDC Development. I'd like to talk about the long-term expansion plan of the data center. Currently, we have eight data centers, including Yangju Data Center, which opened in February this year. We are running eight centers. What we are developing now is a hyper-scale AI-only data center with the goal of operating in 2027 through cooperation with global big tech at the core of the region. I think we will be able to communicate in more detail when the plan is finalized. In addition to this, we are planning to build a new data center in the capital. I'm Yeonwoo, head of AIDC development.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

As for your question on our medium to long-term AIDC or DC business expansion plan, as of now, we are operating eight data centers, including the Yangju Data Center, which recently opened in February. Furthermore, we are working on a project to build a hyperscale AI data center in regional headquarters or in regional hubs in close cooperation with the global big tech. And our target is to open hyperscale AI data centers by 2027. And when we have more detailed plans, we will communicate them with the market. In addition, we already have put in place plans to establish new data centers in the Seoul metropolitan area. So we have a pipeline until 2030 for capacity expansion, and we will continue to increase our data center operational capacity gradually.

speaker
Lee Hyun-woo
Head of AIDC Development, SK Telecom

Also, as the AI era opens up in earnest, The data center business is evolving from a traditional collocation-centered data center to a complete AI data center, and we are planning to have new demands based on this, so we are preparing early business models that can respond to these AI data center demands.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Furthermore, with the full-fledged opening of the AI era, we understand that the existing co-location-based data center business model is quickly switching to a new AI data center business model, and we expect that new types of demand in the market will continue to emerge. So we are working to proactively establish our new data center business models to respond to these demands.

speaker
Lee Hyun-woo
Head of AIDC Development, SK Telecom

First of all, we are working to establish a new AI data center

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

To give you more details, we already launched the subscription-based GPU as a service at the end of last year so that customers can quickly get access to AI data centers with high-performance GPUs. And as I mentioned earlier, we are cooperating with a global big tech company so that we can establish Korea's first hyperscale AI data center.

speaker
Lee Hyun-woo
Head of AIDC Development, SK Telecom

In addition, there are consumers who require a rapid acquisition of low-capacity AI data centers, so there are modular AI data centers for them, and there are also customers who want to own their own AI data centers, so we are offering dedicated AI centers that provide customized turnkeys for these customers.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

In addition, we are building and developing new business models, including a modular AI data center business model where those who need quick access to low-capacity AI data center can utilize, as well as the dedicated AI data center business model where customers who want to possess their own AI data centers can receive a tailored turnkey project. In summary, we will continue to supply AI data center in order to meet changing needs in the market while establishing the AI infrastructure domain as a foundational business for SK Telecom.

speaker
Lee Hyun-woo
Head of AIDC Development, SK Telecom

I will answer the second question. You talked about the profitability of the data center business. From the point of view of EBITDA, the data center business is classified as a corporate business area of SK Broadband. Therefore, it is difficult to distinguish between the EBITDA level of data center business, which should consider indirect distribution,

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Moving on to your second question on the profitability of our data center business in terms of EBITDA margin, I would first like to mention that our data center business is classified as B2B business for SK Broadband. And for this reason, it's difficult to separate and calculate EBITDA margin for data center business only in consideration of allocation of indirect costs and expenses. However, what I can say is that AI or data center business EBITDA margin is slightly higher than the consolidated EBITDA margin of SK Broadband.

speaker
Jung Hae-Joon
Conference Call Host, SK Telecom

Thank you. With this, I will end the conference call. Thank you.

speaker
Hee-Joon Jung
Investor Relations Officer, SK Telecom

Now we would like to conclude the earnings conference call for SK Telecom. If you have any additional questions, please contact the IR team. Thank you.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-