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01/11 03:23
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals significant challenges, including a cybersecurity incident causing substantial financial losses and subscriber churn. Operating income and net income have declined sharply, and revenue guidance has been lowered. The company's attempts to regain customer trust and enhance security measures are positive, but the financial impact remains a concern. The Q&A section highlights uncertainties and unclear management responses regarding future investments and dividends. Overall, the negative financial performance and uncertainties overshadow the positive aspects of AI business growth, leading to a negative sentiment.
Consolidated Revenue KRW 4,338.8 billion, a decline of 1.9% year-on-year due to net subscriber losses from the cybersecurity incident, suspension of new subscriber sign-ups, and sales of certain subsidiaries at the end of last year.
Operating Income KRW 338.3 billion, down 37.1% year-on-year, impacted by USIM replacement costs and one-off costs totaling approximately KRW 250 billion, including loss compensation for authorized dealers.
Net Income KRW 83.2 billion, down 76.2% year-on-year, primarily due to the cybersecurity incident and associated costs.
5G Subscribers Declined by approximately 220,000 quarter-on-quarter to 17.02 million, due to the cybersecurity incident and suspension of new subscriber acquisition.
AI Business Revenue Grew 13.9% year-on-year, partially offsetting the drop in telecom revenue.
AIDC Revenue KRW 108.7 billion, up 13.3% year-on-year, driven by increased data center utilization rates.
AIX Revenue KRW 46.8 billion, up 15.3% year-on-year, supported by increased B2B solution sales.
AI business revenue: Grew 13.9% year-on-year, partially offsetting the drop in telecom revenue. AIDC revenue posted KRW 108.7 billion, up 13.3% year-on-year, thanks to the increase in data center utilization rates. AIX revenue grew 15.3% year-over-year to KRW 46.8 billion on the back of the increase in B2B solution sales. Cumulative subscribers surpassed 10 million at the end of July, with new features like A.Note and briefing beta service launched.
Hyperscale AI data center: Announced a plan to establish a hyperscale AI data center in Ulsan with AWS and SK Group affiliates. This will be Korea's first and largest AI data center, operational by 2027, with a combined capacity of over 300 megawatts by 2030. Expected to generate approximately KRW 1 trillion of annual sales.
Cybersecurity measures: Investing KRW 700 billion over the next 5 years to build a world-class information protection system. Introduced a customer assurance package, including free mobile device security solutions and a Customer Appreciation Package with tariff discounts and additional data benefits.
Financial impact of cybersecurity incident: Consolidated revenue declined 1.9% year-on-year to KRW 4,338.8 billion. Operating income fell 37.1% year-on-year to KRW 338.3 billion, and net income dropped 76.2% year-on-year to KRW 83.2 billion. Measures like USIM replacement and compensation for dealers incurred one-off costs of approximately KRW 250 billion.
AI and telecom business focus: Plans to review and strengthen the core telecom business while growing the AI business. Aims to generate profits through AI and establish a strong foundation for future growth.
Cybersecurity Incident: The company faced a significant cybersecurity incident, leading to customer trust issues, financial losses, and operational disruptions. Measures to address the incident, such as USIM replacements and customer assurance packages, have temporarily impacted earnings and subscriber base.
Financial Impact: Operating income dropped 37.1% year-on-year, and net income fell 76.2% year-on-year due to one-off costs, including loss compensation for authorized dealers and USIM replacement costs. Consolidated revenue declined by 1.9% year-on-year.
Subscriber Loss: The fixed and mobile business experienced a decline in the subscriber base, including a loss of 220,000 5G subscribers, due to the cybersecurity incident and suspension of new subscriber sign-ups.
Regulatory and Compliance Costs: The company is investing KRW 700 billion over five years to build a world-class information protection system, which represents a significant financial commitment.
Market Competition: The AI business is growing but faces competitive pressures as the company seeks to monetize new features and expand its market share.
Medium- to Long-Term Customer Trust Restoration: The company is prioritizing restoring customer trust as a foundation for business growth and corporate value enhancement. This includes measures such as the Accountability and Commitment Program and investments in cybersecurity.
AI Data Center Development: SK Telecom plans to establish a hyperscale AI data center in Ulsan in collaboration with AWS and SK Group affiliates. The center is expected to begin operations in 2027, with a combined capacity of over 300 megawatts by 2030, generating approximately KRW 1 trillion in annual sales.
AI Business Growth: The AI business is expected to continue growing, with new features like A.Note and briefing beta service supporting monetization. The company aims to expand its AI business and generate profits through AI solutions.
Telecom Business Review and Strengthening: The company will review and strengthen its core telecom business while addressing the impacts of the cybersecurity incident.
Second Quarter Dividend Per Share (DPS): KRW 831
Record Date for Dividend: August 31
The earnings call reveals significant financial challenges, including a 12.2% revenue decline and a 90.9% drop in operating income due to cybersecurity penalties. While AI business growth is positive, the lack of dividend declaration and unclear guidance on future dividends signal financial instability. The Q&A highlights ongoing concerns over financial recovery and customer retention. Despite AI and data center progress, the overall sentiment is negative due to the substantial financial setbacks and uncertainty in restoring dividends, likely leading to a negative stock price reaction.
The earnings call reveals significant challenges, including a cybersecurity incident causing substantial financial losses and subscriber churn. Operating income and net income have declined sharply, and revenue guidance has been lowered. The company's attempts to regain customer trust and enhance security measures are positive, but the financial impact remains a concern. The Q&A section highlights uncertainties and unclear management responses regarding future investments and dividends. Overall, the negative financial performance and uncertainties overshadow the positive aspects of AI business growth, leading to a negative sentiment.
Despite strong operating income and AI business growth, the cybersecurity incident poses significant risks. The suspension of new subscriber sign-ups and potential regulatory scrutiny could negatively impact future revenue. Management's inability to provide clear guidance on the incident's financial impact adds uncertainty. While the dividend remains stable, the overall sentiment is negative due to these risks and uncertainties.
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