Investor. Presentation. May 2013

Transcription

1 Investor Presentation May

2 Disclaimer This material contains forward-looking statements with respect to the financial condition, results of operations and business of SK Telecom and its subsidiaries (the Company ) and plans and objectives of the management of the Company. Statements that are not historical facts, including statements about the Company s beliefs and expectations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. The Company does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained in this management presentation, and nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Such forward-looking statements were based on current plans, estimates and projections of the Company and the political and economic environment in which the Company will operate in the future, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. Additional information concerning these and other risk factors are contained in the Company s latest annual report on Form 20-F and in the Company s other filings with the U.S. Securities and Exchange Commission (SEC).

3 Contents 1. MNO Marketing strategy Tariff plans Subscribers ARPU Marketing expenses & CAPEX 2. Growth businesses (non-mno) B2B IPTV Platform 3. Financial results for 1Q13

4 1. MNO Marketing strategy SK Telecom management is focused on shifting the marketing paradigm to retention Retention programs Reduced marketing expenses New price plans Churn reduction plans T&T Sharing plan - Unlimited on-net voice calls All Sharing plan - Unlimited on&off-net voice calls Implemented early termination penalty program in Nov Over 90% of new subscribers Other retention focused initiatives launched/planned Increase service stickiness Reduce MNP and churn Reduce marketing expenses Enhanced upgrade plan Upgrade program that provides more benefits to long-term subscribers Subsidy regulation KCC closely monitoring market activities Legislation to regulate subsidy levels in preparation 1

5 1. MNO Tariff plans Introduced new price plans to accelerate move towards data and enhance retention - Launched T&T and All Sharing plans in March and April, respectively T&T and All sharing plans Price plan 35 On-net Voice Off-net (min.) Data Price (net of discount) M 27, G 33, G 40, Unlimited 280 5G 48, Unlimited mobile 8G 56, Unlimited 12G 65,000 mobile and 100 fixed 16G 76,000 Current status of new tariff plan Strong uptake - After 3 days: 0.2m subscribers 2 weeks: 0.6m end of April: 1.2m Attractive pricing - Non-aggressive, but competitive in terms of benefits and pricing Up-selling effect - LTE subscribers choosing to remain at existing or move up to a higher plan to maintain data allotment - 2G and 3G subscribers upgrading to higher LTE price plans Retention oriented programs - Have and will continue to introduce retention focused programs and encourage data usage Note: Additional KRW 3,000 for unlimited voice plan 2

6 1. MNO Subscribers LTE and smartphone subscribers continue to show steady growth Retention-centric paradigm shift to lead to decrease in churn rate Subscribers 1Q13 1Q12 YoY 1Q13 4Q12 QoQ Subscribers ('000) 27,030 26, ,030 26, Net adds (115) Activations 2,013 1, ,013 2,138 (125) Deactivations 1,945 1,978 (34) 1,945 1,955 (10) Monthly churn rate (%) 2.4% 2.5% -0.1%p 2.4% 2.4% 0.0%p Average subscribers ('000) 26,974 26, ,974 26, Smartphone subscribers ('000) 16,647 12,574 4,072 16,647 15, LTE subscribers ('000) 9,334 1,766 7,568 9,334 7,530 1,804 Subscribers by network (m) LTE WCDMA CDMA Total subscribers exceeded 27m as of 1Q13 Despite intense market competition in 1Q13, the churn rate decreased marginally YoY as focus turned to retention activities LTE subscribers reached 9.3m in 1Q13 and exceeded 10m recently. Over 35% of SKT s subscribers are on the LTE service The number of smartphone subscribers exceeded 16m, accounting for more than 60% of the subscriber-base Q13 Smartphone subscribers (m) % % Smartphones 59.3% 61.6% 100.0% % 50.0% % of total 1.9% 15.2% subscribers 0.0% Q13 3

7 1. MNO ARPU ARPU continues to show solid growth boosted by the rise in LTE subscribers Expect billing ARPU to maintain positive momentum ARPU ARPU 1) (KRW) 1Q13 1Q12 YoY 1Q13 4Q12 QoQ Total ARPU 40,450 39,136 1,314 40,450 41,171 (721) Billing ARPU 2) 33,668 32,245 1,423 33,668 33,761 (93) Led by continued LTE subscribers growth, 1Q13 billing ARPU increased 4.4% YoY - LTE ARPU recorded KRW 48,400 in 1Q13, 44% higher than the billing ARPU 1) Includes SK Planet's earnings 2) The billing ARPU excludes sign-up fee from mobile service revenues ARPU is expected to rise further as the higher ARPU LTE subscriber-base expands and data traffic increases Billing ARPU (KRW 000) % YoY Q12 2Q12 3Q12 4Q12 1Q13 1Q13 ARPU comparison (KRW 000) % % 10.0 LTE Smartphone Billing ARPU 4

8 1. MNO Marketing expenses & CAPEX Retention-based service paradigm shift to stabilize market CAPEX expected to decrease approximately 26% YoY in 2013 Marketing expenses & CAPEX (KRW bn) 1Q13 1Q12 YoY 1Q13 4Q12 QoQ Marketing expenses 1) % of revenues 29.1% 24.1% 5.0%p 29.1% 23.9% 5.3%p Capital expenditures (131) (621) % of revenues 11.3% 16.0% -4.8%p 11.3% 30.8% -19.5%p 1) Marketing expenses = marketing related commissions + advertising expense 1,100 1, (KRW bn) Marketing expenses % 960 1, % 33.4% % % 1Q12 2Q12 3Q12 4Q12 1Q % 150.0% Marketing expenses 100.0% 50.0% % of revenues 0.0% Marketing expenses rose 25% YoY, and 20% QoQ due to the heated LTE market competition. As of mid-march, marketing intensity has cooled sharply CAPEX decreased sharply following the completion of the nationwide LTE network rollout in FY12 CAPEX (KRW bn) Non-network Network 1Q12 2Q12 3Q12 4Q12 1Q13 5

9 2. Growth businesses Overview SK Telecom is at the forefront of new growth businesses Leveraging core competencies - wide market presence, large subscriber-base, expertise in network management Growth business domains & entities 100% App. Store M-commerce LBS B2B solution Healthcare 50.56% IPTV B2B solution - Actively pursuing opportunities in five major growing segments ranging from solutions for small retailers to energy management for commercial building, to smart cloud solutions Healthcare - Providing mobile solutions for individuals, patients, hospitals, as well as remote diagnostic solutions - Strong partnerships with Seoul National University Hospital, Seegen and NanoEnTek Platform - Core businesses (T store, 11 th Street and T map) recording continued strong growth - Merger with SK M&C expected to generate significant on/offline synergy IPTV - Growing fixed IPTV ( Btv ) to be complemented by rising mobile Btv subscribers 6

10 2. Growth businesses B2B solutions business Targeting B2B revenues of KRW 1.8 tn in 2013, up 26% YoY Solutions segment to drive growth of B2B business B2B solutions revenues (KRW bn) 150 1,600 Solution as % of B2B revenues 130 1, , ,000 1,500 Five core solution businesses 100% 90% 80% 70% 60% Smart Store - Integrated sales, promotion, client management solutions and POS device for franchise shops and small enterprises Smart Work - Industry-specific customized solutions as well as installment of ICT infrastructure to enhance productivity, efficiency and security % % % 50% 50% 40% 30% 20% 10% Smart Cloud - Cloud solution based on mobile technology that offers the highest in security standards and big data-related services Green & Safety - Solutions to increase energy efficiency and safety of manufacturing facilities and commercial buildings 1Q12 1Q (E) 2015 (E) 0% M-Ad & Payment - Mobile advertising and payment solutions including coupons, settlements, authentication and other value-added services 7

11 2. Growth businesses IPTV business Targeting fixed/mobile IPTV subscribers of 7m by 2015 Mobile IPTV to show strong growth as demand for mobility and convenience increase IPTV subscribers & ARPU Solution services Expanding IPTV market share with bundled services - Bundled offering, a compelling reason for IPTV subscription to 92% of IPTV subscribers (Dec. 2012, KCC) Subscribers (m) ARPU (KRW) 15,424 15, ,000 17,000 16,000 - Targeting 7m subscribers by 2015 Robust IPTV revenue growth to continue - Rising monthly fees and paid-content sales bolstered by , α 15,000 14,000 growing home-shopping commissions and advertisements ,000 12,000 11,000 Mobile IPTV - Paying subscribers now stand at 0.6m. Service launch in Oct Q (E) 2015 (E) 10,000 - Expect to reach 2m subscribers by 2013 ARPU excludes mobile IPTV - Continuing to differentiate the service with exclusive mobile broadcast rights for Major League Baseball and 1-hour turnaround in screening of popular terrestrial-tv programs 8

12 2. Growth businesses Platform business Targeting annual revenues of KRW 1.5tn in 2013 SK planet s merger with SK M&C provides for an integrated on/offline marketing and big data opportunities, enhancing growth of commerce and content platforms SK planet revenues 11st transaction volume (KRW 0.7 tn) % (KRW tn) Q12 2Q12 3Q12 4Q12 1Q Web + Mobile Mobile (KRW bn) T store registered users 25 (m) E-16 1Q12 1Q (E) 10 5 Note: SK M&C merger reflected in 1Q13 and 2013(E) figures Q12 2Q12 3Q12 4Q12 1Q13 9

13 2. Growth businesses Data-centric era SKT is leading the industry towards an age of true mobile broadband data and is transforming its businesses to maximize the new opportunities Data-centric era creates new business opportunities SKT is leading the paradigm shift Rapid proliferation of LTE technology: fixed mobile, voice data, one device multi devices Data-centric era to spur growth of telco businesses and create new business opportunities LTE-A will broaden opportunities for new growth Competitive paradigm Retention focused management activities Adopting data-centric price plan Business model transformation At the forefront of new growth businesses, leveraging the large subscribers-base and network management expertise Combining ICT and connectivity with different industries to widen business scope 10

14 3. Financial results Consolidated Income Statement Operating revenues increased YoY due to increased sales from expanding LTE subscribers and new businesses Operating income decreased as a result of increased investments in FY12 and a rise in marketing expenses over the same period Summary of Income Statement (Consolidated) (KRW bn) 1Q13 1Q12 YoY 1Q13 4Q12 QoQ Operating revenues 4,113 3, ,113 4,197 (85) Operating expenses 3,702 3, ,702 3, Operating income (89) (134) Operating margin 10.0% 12.6% -2.6%p 10.0% 13.0% -3.0%p Net profit or loss from non-operating items 17 (104) Income from continuing operations before income tax (88) (222) Consolidated net income (173) Net margin 8.4% 7.6% 0.8%p 8.4% 12.4% -4.0%p Majority interests Minority interests (8) (6) (169) (2) (8) (4) (4) Operating revenues: SK Telecom ( SKT or the Company ) recorded a 2% QoQ decrease due to the seasonal effect from decreased days. However, operating revenues grew 4% YoY, led by the growth of LTE subscribers, new businesses including B2B solutions, and the merger of SK M&C with SK Planet Operating income: Decreased 18% YoY due to the increase in depreciation costs stemming from SKT s network capital investment and a rise in marketing expenses. EBITDA slid 1% YoY Consolidated net income: Increased 15% YoY as positive earnings from SK Hynix contributed KRW 33 bn to pre-tax profits EBITDA 1) 1,093 1,108 (15) 1,093 1,248 (156) EBITDA margin 26.6% 27.9% -1.3%p 26.6% 29.7% -3.2%p 1) EBITDA = Operating income + Depreciation (including R&D-related depreciation) 11

15 3. Financial results Consolidated operating expenses Operating expenses increased due to labor cost, commissions paid, advertising, depreciation, and COGS Operating expenses (Consolidated) (KRW bn) 1Q13 1Q12 YoY 1Q13 4Q12 QoQ Labor Commissions paid 1,451 1, ,451 1,470 (19) Advertising (5) (73) Depreciation 1) (22) Network interconnection (44) Leased line (4) Frequency usage fees (1) (2) Cost of goods sold Others (23) Operating expenses 3,702 3, ,702 3, ) Includes R&D-related depreciation Labor costs: Increased YoY due to the increase in employees as a result of the SK M&C s merger with SK Planet. This, coupled with the seasonal New Year-bonuses contributed to the QoQ increase Commissions paid: Increased YoY mainly due to the rise in SKT s marketing expenses. The QoQ decrease resulted from reduction in commissions of subsidiaries Advertising: Decreased QoQ due to the base effect of increased year-end advertisement in 4Q12 Depreciation: Increased YoY due to SKT s increased network-related capital investment in FY12. While decrease in depreciable assets led to a QoQ decrease Cost of goods sold: Increased on YoY and QoQ basis due to the merger of SK M&C with SK Planet 12

16 3. Financial results Consolidated Balance Sheet Asset decreased due to debt repayment and a decrease in the number of consolidating subsidiary companies Balance Sheet (Consolidated) (KRW bn) 1Q13 1Q12 YoY 1Q13 4Q12 QoQ Total assets 25,409 26,547 (1,138) 25,409 25,596 (187) Current assets 5,082 5,556 (474) 5,082 5,294 (213) Cash & marketable securities 1,493 2,457 (964) 1,493 1, Non-current assets 20,327 20,991 (664) 20,327 20, Property & equipment 9,604 8, ,604 9,740 (136) Intangible assets 4,390 4,681 (291) 4,390 4,434 (44) Investment assets 5,809 6,160 (352) 5,809 5, Total liabilities 13,041 14,155 (1,114) 13,041 12, Current liabilities 6,287 6,583 (295) 6,287 6, Short-term borrowings 160 1,140 (980) (440) Current portion of long-term debt 1) Non-current liabilities 6,754 7,572 (818) 6,754 6, Bonds payable & long-term borrowings 5,750 6,315 (565) 5,750 5, Total shareholders' equity 12,368 12,392 (24) 12,368 12,855 (487) Interest-bearing debt 2) 6,670 7,917 (1,247) 6,670 6,684 (14) Debt/Equity ratio 3) 53.9% 63.9% -10.0%p 53.9% 52.0% 1.9%p 1) Includes current portion of long-term payables related to payment of frequency license fee 2) Interest-bearing debt = Short-term borrowings + Current portion of long-term debt + Bonds payable & long-term borrowings 3) Debt/Equity ratio = Interest-bearing debt / shareholders' equity Assets Current assets: Decreased 9% YoY as SKT s debt repayment reduced cash. Sale of Paxnet and SKY Property 1) reduced current assets by 4% QoQ Non-current assets: Decreased 3% YoY due to the decrease in the number of consolidating subsidiaries 1) 1) Number of consolidating subsidiaries decreased (32 29) as a result of the sale of Paxnet and SKY Property Liabilities Current liabilities: Decreased 4% YoY due to the SKT s debt payment. The 2% QoQ rise was due to the increase in dividends payable Non-current liabilities: Decreased 11% YoY due to the reduction in SKT s long-term debt. The 3% QoQ increase resulted from SKT s issuance of bonds Shareholders equity The 4% QoQ decrease resulted from SKT s dividends payable allocation in 1Q13 13

17 3. Financial results Non-consolidated operating revenues Operating revenues increased YoY due to increased LTE subscribers and sales from new businesses Operating revenue declined QoQ due to a decrease in number of working days Operating revenues (Non-consolidated) (KRW bn) 1Q13 1Q12 YoY 1Q13 4Q12 QoQ Mobile service 2,727 2, ,727 2,782 (55) Interconnection (44) New business & others 1) (36) Total operating revenues 3,112 3, ,112 3,159 (47) 1) Includes sales from leased line, fixed-line resale, solution and other businesses 3,000 2,500 2,000 3, ,069 Operating Revenues (KRW bn) 3, ,621 2,666 2,689 3, , ,782 2,727 1Q12 2Q12 3Q12 4Q12 1Q13 Mobile Service Revenue Interconnection New Business & Others 1Q13 total operating revenues increased 3.5% YoY, led by the growth of LTE subscribers and increased new business-related sales including B2B solutions. The 1.5% QoQ decrease was due to the seasonal effect arising from reduced days in February - Interconnection: Decreased YoY resulting from the adoption of lower interconnection rates and reduced call volume. The QoQ increase was due to the retroactive adjustment of the new interconnection rates in 4Q12 - New business & others: Increased YoY on strong sales of B2B businesses. While the QoQ decrease was due to the base effect of B2B-related year-end sales increase in 4Q12 14

18 Appendix Consolidated Income Statement (KRW bn) 1Q12 2Q12 3Q12 4Q12 1Q13 Operating revenues 3, , , , ,112.6 Operating expenses 3, , , , ,702.0 Labor cost Commissions paid 1, , , , ,450.8 Advertising Depreciation 1) Network interconnection Leased line Frequency usage fees Cost of goods sold Others Operating income EBITDA 1, , , ,092.6 EBITDA margin 27.9% 25.5% 23.3% 29.7% 26.6% Non-operating items (104.4) (105.1) (105.4) Interest income Interest expense Others, net (39.8) (27.5) (24.7) Income from continuing operations before tax Income (loss) from discontinued operations 2) (9.9) (123.8) 0.1 (5.7) - Consolidated net income Majority interests Minority interests (6.0) (22.8) (3.2) (3.9) (8.2) 1) Includes R&D-related depreciation 2) Losses from discontinuation of satellite DMB business 15

19 Appendix SK Telecom Non-consolidated Income Statement (KRW bn) 1Q12 2Q12 3Q12 4Q12 1Q13 Operating revenues 3, , , , ,112.1 Operating expenses 2, , , , ,692.0 Labor Commissions paid 1, , , , ,364.1 Marketing commissions Other commissions Advertising Depreciation 1) Network interconnection Leased line Frequency usage fees Others Operating income EBITDA , EBITDA margin 30.3% 26.7% 23.1% 33.7% 29.7% Non-operating items (48.8) (97.6) (87.6) (39.9) Interest income Interest expense Others, net 1.2 (30.8) (16.7) Income from continuing operations before tax Net income ) Includes R&D-related depreciation 16

20 Appendix Consolidated Balance Sheet (KRW bn) 1Q12 2Q12 3Q12 4Q12 1Q13 Total assets 26, , , , ,408.8 Current assets 5, , , , ,081.7 Cash and marketable securities 1) 2, , , , ,493.0 Accounts receivable 2, , , , ,920.7 Short-term loans Inventories Other current assets Non-current assets 20, , , , ,327.2 Property & equipment 8, , , , ,604.1 Intangible assets 4, , , , ,389.9 Investment assets 6, , , , ,808.6 Other non-current assets 1, , , Total liabilities 14, , , , ,041.1 Current liabilities 6, , , , ,287.1 Short-term borrowings 1, Accounts payable 1, , , , ,966.5 Current portion of long-term debt Other current liabilities 3, , , , ,250.4 Non-current liabilities 7, , , , ,754.0 Bonds payable & long-term borrowings 6, , , , ,750.3 Long-term payables - other Post-employment benefit obligation Other non-current liabilities Total shareholders' equity 12, , , , ,367.7 Capital stock Capital surplus 2, , , , ,924.8 Retained earnings 11, , , , ,890.3 Capital adjustments (3,215.4) (3,215.4) (3,215.4) (3,213.6) (3,276.8) Other comprehensive income/loss 2) (25.6) 2.2 Minority interests 1, , , , ) Cash & marketable securities includes cash & cash equivalent, marketable securities & short-term financial instruments 2) Other comprehensive income/loss include gains or losses on valuation of investment securities and derivatives 17

21 Appendix SK Telecom Non-consolidated Balance Sheet (KRW bn) 1Q12 2Q12 3Q12 4Q12 1Q13 Total assets 23, , , , ,391.5 Current assets 3, , , , ,765.8 Cash and marketable securities 1) 1, Accounts receivable 1, , , , ,871.3 Short-term loans Inventories Other current assets Non-current assets 19, , , , ,625.7 Property & equipment 6, , , , ,043.8 Intangible assets 3, , , , ,419.4 Investment assets 9, , , , ,810.6 Other non-current assets Total liabilities 11, , , , ,326.9 Current liabilities 5, , , , ,591.6 Short-term borrowings Accounts payable 1, , , , ,430.3 Current portion of long-term debt Other current liabilities 2, , , , ,410.9 Non-current liabilities 6, , , , ,735.3 Bonds payable & long-term borrowings 5, , , , ,764.4 Long-term payables Post-employment benefit obligation Other non-current liabilities Total shareholders' equity 11, , , , ,064.7 Capital stock Capital surplus 2, , , , ,920.9 Retained earnings 11, , , , ,128.4 Capital adjustments (3,156.9) (3,157.1) (3,157.1) (3,157.1) (3,157.1) Other comprehensive income/loss 2) ) Cash & marketable securities includes cash & cash equivalent, marketable securities and short-term financial instruments 2) Other comprehensive income/loss includes gains or losses on valuation of investment securities and derivatives 18