Investor Presentation February 2014
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). 1
Table of Contents Key Takeaways 3 Operating Results 8 Financial Results 10 Shareholder Return 13 2
18.0 15.0 12.0 9.0 6.0 3.0 0.0 200% 150% 100% 50% 0% Key Takeaways MNO Growth Expanding LTE subscriber base and increasing date usage, leading ARPU growth [LTE Subscriber] [Increasing Data Usage] [ARPU Turnaround] (m subs) 13.5 17.6 Packaged Price Plan Baseball*, Olympics, World cup, etc. 7.5 67% 49% 0.6 28% 2% '11 '12 '13 '14 Subscribers % of total subscriber-base *Sports Pack priced at KRW 9,000won B2B Subscriber (Sponsored data) Home-shopping*, Coca- Cola**, etc. *Free Data in App. **Data Gift Program (KRW 000) 33.8 33.7 34.0 34.9 35.7 [Price Plan Up-selling] LTE 69 LTE 62 3G 54 12 17 [Data Traffic] (Peta Byte) 21 25 28 4Q12 1Q13 2Q13 3Q13 4Q13 (KRW tn) 12 13 YoY Mobile rev 12.3 12.9 +4.3% - Service rev 10.8 11.1 +3.3% 4Q12 1Q13 2Q13 3Q13 4Q13 3
Key Takeaways Marketing Paradigm Shift Retention programs generating positive results [Retention Subsidy Program] [Environment] [MNP Market] (m subs) (m subs) 1.8 2.4 12.0 12.6 11.2 0.5 1.1 1Q13 2Q13 3Q13 4Q13 LTE migration slowing 12-6.9m, 13-5.9m, 14(E) - 4.1m(E) '11 '12 '13 [Commissions Paid] (KRW tn) 6.0 [Early Termination Penalty Program] (m subs) 9.4 7.7 5.7 3.1 Increased regulatory oversight KCC s tightened regulation remain unchanged Handset legislation in the National Assembly 2.6 5.5 '12 '13 [Churn Rate] 2.4 2.3 2.3 2.1 1Q13 2Q13 3Q13 4Q13 '12 1Q13 2Q13 3Q13 4Q13 4
Key Takeaways Marketing Paradigm Shift SK Telecom, at the forefront of creating innovative products and services [B tv Mobile] [T phone] [Data Creation/gift] - Mobile media [IPTV B box] - Data service innovation Retention Policy - Innovative comm. platform - Mobile Internet is so fun Subsidy Competition Service Innovation - Home service centering on B box Service innovations enrich user experience, and create new growth momentum 5
Key Takeaways Network Competiveness SK Telecom is leading the LTE network evolution MAX 150Mbps MAX 225Mbps MAX 300Mbps [SK Telecom =] Technological Leader First to launch LTE-A services and demonstrate tri-band LTE-A 800M 1.8G [Wideband LTE-A] 800M 1.8G [Tri-band LTE-A] Efficient Network Most efficient provider of LTE network supporting the largest subscriber base 800M 1.8G [LTE-A] Ample spectrum capacity to absorb growing data traffic Wide coverage and high throughput to deliver rich data services - Full HD/UHD, multi view, online game, FLAC, etc. - Tri-band LTE-A can download a 800MB movie in 22 sec. (1.25min in LTE) Robust Network Breadth and depth of coverage offers optimal coverage to support innovative data-centric services 6
Key Takeaways Growth Model Fully utilizing SK Telecom s assets to enter new markets beyond MNO Large scale smart N/W Provides the basis for provisioning of wide-range of services B2B Solution Health care IoT B2B Solutions Targeting doubling in sales to KRW 1tn in 2014 Big Data Significant potential for targeted marketing and creation of new businesses Wideband LTE-A Big Data Big Data Big Data Big Data Healthcare We pursue entry into strategic market(us, China and Southeast Asia) Subscriber Base Ability to leverage 27m+ subscribers to create and populate new platforms Wearable Device Media Biz Platform Platforms SK Planet to focus on on/offline-mobile commerce To launch platforms and services for communications, the home, media, entertainment and security 7
18.0 15.0 12.0 9.0 6.0 3.0 0.0 Operating Results (Non-consolidated) Subscriber Numbers 2013 2012 YoY 4Q13 3Q13 QoQ Subscribers ('000) 27,352 26,961 391 1.5% 27,352 27,211 142 0.5% Net adds 391 409 (18) -4.3% 142 71 71 100.2% Activations 7,755 8,644 (889) -10.3% 1,885 1,903 (18) -1.0% Deactivations 7,364 8,235 (871) -10.6% 1,743 1,832 (89) -4.9% Monthly churn rate (%) 2.3% 2.6% -0.3%p 2.1% 2.2% -0.1%p Average subscribers ('000) 27,121 26,680 441 1.7% 27,266 27,164 102 0.4% Smartphone Subscribers ('000) 18,286 15,979 2,308 14.4% 18,286 17,917 370 2.1% LTE Subscribers ('000) 13,487 7,530 5,957 79.1% 13,487 12,273 1,213 9.9% The churn rate fell further to 2.1% in 4Q13, lowering the annual average to 2.3% The number of LTE subscribers reached 13.5m in 4Q13 and continues to show steady growth. Over 49% of SKT s subscribers are currently on the LTE service Smartphone Subscribers (m) ARPU 18.3 16.0 11.1 59.3% 66.9% 0.5 3.9 41.7% 1.9% 15.2% '09 '10 '11 '12 '13 200.0% 150.0% Subscribers 100.0% 50.0% % of Total Subscriberbase 0.0% ARPU 1) (KRW) 2013 2012 YoY 4Q13 3Q13 QoQ Total ARPU 42,377 40,128 2,250 5.6% 44,448 42,780 1,668 3.9% Billing ARPU 2) 34,551 33,016 1,535 4.6% 35,650 34,909 741 2.1% 1) Includes SK Planet's earnings / based on SKT subscribers only 2) The billing ARPU excludes sign-up fee from mobile service revenues Annual billing ARPU increased 4.6% YoY led by the growth of LTE subscribers. Quarterly billing ARPU grew 2.1% QoQ and 5.6% YoY 8
Operating Results (Non-consolidated) Marketing Expenses & Capex (KRW bn) 2013 2012 YoY 4Q13 3Q13 QoQ Marketing expenses 1) 3,428 3,474 (46) -1.3% 842 827 15 1.8% % of revenues 26.7% 28.2% -1.5%p 25.4% 25.7% -0.3%p Capital expenditure 2,316 2,858 (542) -19.0% 1,254 419 835 199.5% % of revenues 18.0% 23.2% -5.2%p 37.8% 13.0% 24.8%p 1) Marketing expenses = marketing related commission + advertising expense Annual marketing expenses decreased 1.3% YoY as the Company s focus on retention reduces market competition and costs Annual Capex decreased 19% YoY, and is expected to trend lower Marketing Expenses (KRW bn) 1,100 1,000 900 800 700 600 500 400 300 200 100-960 1,035 725 754 907 853 827 842 24.1% 31.3% 33.4% 23.9% 29.1% 26.6% 25.7% 25.4% '12.1Q '12.2Q '12.3Q '12.4Q '13.1Q '13.2Q '13.3Q '13.4Q 200.0% 150.0% 100.0% 50.0% 0.0% Marketing Expenses % of Revenue Capex 482 58 424 616 61 555 788 80 708 972 105 867 418 351 294 29 113 71 322 223 305 1,254 201 1,053 Non-Network Network '12.1Q '12.2Q '12.3Q '12.4Q '13.1Q '13.2Q '13.3Q '13.4Q (KRW bn) 9
Financial Results SK Telecom s Operating Revenues (Non-consolidated) (KRW bn) 2013 2012 YoY 4Q13 3Q13 QoQ Total operating revenues increased 4.3% YoY led by LTE Total operating revenue 12,860 12,333 528 4.3% 3,316 3,223 93 2.9% Mobile service revenue 11,110 10,759 352 3.3% 2,828 2,768 60 2.2% Interconnection revenue 899 936 (38) -4.0% 240 231 9 4.1% New business & others 1) 852 638 214 33.5% 248 224 24 10.7% 1) Includes sales from leased line, fixed-line resale, solution and other businesses subscriber growth and increased new business-related sales - Interconnection decreased 4% YoY resulting from decreased traffic from inbound fixed-line calls. Interconnection rose 4.1% QoQ as the introduction of [ SK Telecom Operating Revenues ] (KRW bn) unlimited voice price plans increased mobile traffic - Strong sales of B2B businesses continue to drive contribution ratio of new business & others 3,000 3,007 132 254 3,069 3,097 3,159 3,112 138 157 211 175 264 252 166 210 3,209 3,223 205 224 217 231 3,316 248 240 [ New Business & Others, % of Total Revenue ] 2,500 2,621 2,666 2,689 2,782 2,727 2,787 2,768 2,828 Year % of Rev Quarter % of Rev 13.1Q 5.6% 2,000 11 5.1% 13.2Q 6.4% '12.1Q '12.2Q '12.3Q '12.4Q '13.1Q '13.2Q '13.3Q '13.4Q New Business & Others Interconnection Mobile Service Revenue 12 5.2% 13 6.6% 13.3Q 6.9% 13.4Q 7.5% 10
Financial Results Summary of Income Statement (Consolidated) (KRW bn) 2013 2012 YoY 4Q13 3Q13 Operating revenue 16,602 16,141 461 2.9% 4,295 4,125 170 4.1% Operating expenses 14,591 14,411 180 1.2% 3,785 3,573 212 5.9% Operating income 2,011 1,730 281 16.2% 510 551 (42) -7.6% Operating margin 12.1% 10.7% 1.4%p 11.9% 13.4% -1.5%p Net profit or loss from non-operating items Income from continuing operations before income tax (184) (211) 27 12.7% (125) (122) (3) -2.9% 1,827 1,519 308 20.3% 385 430 (45) -10.5% Consolidated net income 1,610 1,116 494 44.3% 294 502 (209) -41.5% Net margin 9.7% 6.9% 2.8%p 6.8% 12.2% -5.3%p EBITDA 1) 4,831 4,297 533 12.4% 1,238 1,258 (20) -1.6% QoQ SK Telecom ( SKT or the Company ) operating revenues recorded a 2.9% YoY increase led by the growth of LTE subscribers and new businesses including B2B solutions Operating income increased 16.2% YoY as heightened focus on service-oriented marketing led to reduced subsidy costs Consolidated net income increased 44.3% YoY due to increased equity gains from SK Hynix EBITDA margin 29.1% 26.6% 2.5%p 28.8% 30.5% -1.7%p 1) EBITDA = Operating income + Depreciation (including R&D related depreciation) 11
Financial Results Operating Expenses (Consolidated) (KRW bn) 2013 2012 YoY 4Q13 3Q13 QoQ Labor cost 1,561 1,268 293 23.1% 395 363 32 8.7% Commissions paid 5,499 5,950 (451) -7.6% 1,366 1,350 16 1.2% Advertising 394 384 10 2.5% 130 92 39 42.2% Depreciation 1) 2,820 2,567 252 9.8% 728 706 22 3.1% Network interconnection 1,044 1,057 (13) -1.3% 274 265 9 3.4% Leased line 242 265 (22) -8.4% 55 62 (7) -10.7% Frequency usage fees 207 204 2 1.1% 50 52 (2) -4.1% Cost of goods sold 1,300 1,292 8 0.6% 370 306 64 20.7% Others 1,524 1,424 100 7.0% 417 377 40 10.5% Operating expenses 14,591 14,411 180 1.2% 3,785 3,573 212 5.9% 1) Includes R&D related depreciation Labor costs increased 23.1% YoY as a result of the SK M&C s merger with SK Planet and increased number of employees Commissions paid decreased 7.6% YoY as reduced market mobility and expenses decreased related costs Depreciation increased 9.8% YoY due to increases in depreciable LTE network assets and a acquisition of new spectrum Cost of goods sold increased 20.7% QoQ in line with the growth of B2B solutions, SK Planet and PS&M 12
Shareholder Return Maintain strong shareholder return policy 07 08 09 10 11 12 13(E) Paid annual cash dividend of KRW 9,400/share since Cash Dividend Dividend Policy Dividend Per Share DPS KRW 9,400 / Share 2007 including interim dividend of KRW 1,000/share Commenced share buyback in 4 out of past 7 years Payout Ratio 42% 53% 53% 34% 39% 53% 73% Total Shareholder Returns (KRW bn) 1 1 1 1 1 1 0 0 0 0 0 880 864 801 119 774 92 680 210 208 655 666 '07 '08 '09 '10 '11 '12 '13(E) 현금배당 Cash Dividend 자사주 Share * Buyback 13