SK Telecom (SKM) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue for Q2 2024 was KRW 4.4224 trillion, an increase of 2.7% year-over-year, driven by stable growth in the MNO business and major subsidiaries [4] - Operating income rose to KRW 537.5 billion, up 16% year-over-year, attributed to stabilized costs and recognition of one-off profit [4] - Net income reached KRW 350.2 billion, with non-consolidated revenue at KRW 3.1915 trillion, up 2.3% year-over-year [5] Business Line Data and Key Metrics Changes - AI infrastructure revenue grew by 20.5% year-on-year, driven by increased demand for data centers and higher utilization rates [5] - The MNO business reported 16.230 million 5G subscribers, accounting for over 70% of the total subscriber base [7] - The enterprise business maintained a growth trend of approximately 10% year-over-year, with IoT revenue growing by 29% and cloud business revenue increasing by 28% year-over-year [8] Market Data and Key Metrics Changes - The fixed-end mobile market is maturing, but efforts to sell high ARPU price plans are improving profitability [7] - The overall handset-related competition landscape is expected to intensify with the upcoming iPhone release, but telcos are focusing on price plans and differentiated services rather than subsidies [19] Company Strategy and Development Direction - The company aims to become a global AI leader, focusing on partnerships and investments in AI, having invested over $300 million in AI since last year [3] - The AI pyramid strategy is central to the company's growth, with plans to continue pursuing investments and partnerships to enhance AI competitiveness [3] - The company is committed to balancing investments for growth, financial structure improvement, and shareholder returns to maximize corporate value [11] Management's Comments on Operating Environment and Future Outlook - Management highlighted that the good results in Q2 were due to growth in 5G subscribers, payTV market, and improved business fundamentals [15] - The competitive landscape is shifting towards price plans and differentiated services, with a focus on utilizing AI for marketing and operational efficiency [19] - Future investments will be guided by the AI pyramid strategy, with a focus on areas that can generate profit [23] Other Important Information - The company maintained a dividend per share (DPS) of 831, consistent with Q1 2023, and aims to reinforce strong earnings from the fixed-end mobile business [10] - The company plans to utilize excess cash flow for investments, shareholder returns, and improving financial stability [26] Q&A Session Summary Question: Factors behind good Q2 results and outlook for the bottom line - Management attributed good results to growth in 5G subscribers, payTV market, and one-off profit from patent pools [15][16] Question: Competitive landscape and handset-related competition - Management noted that while number transfers increased, it had little impact on market size or profitability, emphasizing competition on price plans and services [19] Question: Resource allocation plans and balance between liabilities, shareholder returns, and AI investments - Management outlined plans to use excess cash flow for growth investments, shareholder returns, and improving financial stability [22][25] Question: Expected profitability of AI businesses and Edge AI plans - Management indicated that AI datacenters can generate revenue immediately, while B2B and B2C AI initiatives are expected to contribute to profitability [31][32] Question: Timeline for materialization of AI business results and investment in Perplexity - Management expects visible monetization from AI businesses soon, with a focus on AI datacenters and partnerships for generative AI [31][34]