[Comprehensive] "Tal-tongsin Leads and 5G Pushes"… SKT Soars with 29% Increase in Q1 Operating Profit

[Asia Economy Reporter Seulgina Jo] ‘De-telecommunication’ led the way and ‘5G’ pushed forward. SK Telecom, which declared its leap into a comprehensive ICT platform company, recorded nearly 30% growth in the first quarter of this year, driven by new businesses including media. Operating profit from 'New ICT' businesses such as media, commerce, and security increased by more than 60%, and the core mobile network operator (MNO) division also achieved double-digit growth due to the expansion of 5G subscribers.

On the 11th, SK Telecom, the first among the three major domestic telecom companies to announce its first-quarter results, reported quarterly sales of KRW 4.7805 trillion and operating profit of KRW 388.8 billion. With continued growth in new business sectors such as media, sales increased by 7.4% and operating profit by 29.0% compared to the same period last year. Net profit rose 86.9% to KRW 572 billion, influenced by equity method gains from SK Hynix shares.

◇ Strong Performance Driven by New Businesses and 5G

SK Telecom’s strong performance directly reflected the impact of new businesses. Despite the COVID-19 pandemic last year, the New ICT businesses such as media and commerce, which had driven solid results, posted an operating profit of KRW 103.4 billion in the first quarter of this year, a remarkable 64.1% increase compared to the same period last year. Sales also rose 16.7%, accounting for 31.8% of total sales.

This growth is attributed to an increase in media subscribers, new security businesses such as home and parking services, and growth in commerce transaction volume. In particular, the media business saw operating profit growth of 98.9%, driven by IPTV growth and the merger effect with T-Broad.

The core mobile communication business also showed strong results by solidifying its 5G leadership. The MNO division successfully turned around last year, supported by the expansion of 5G subscribers and increased data usage. In the first quarter of this year, SK Telecom’s standalone sales amounted to KRW 2.9807 trillion, and operating profit was KRW 307.3 billion, representing increases of 1.9% and 19.0%, respectively, compared to the previous year.

Notably, as the proportion of 5G subscribers steadily increased, there was a simultaneous rise in average revenue per user (ARPU) and wireless service sales. As of the end of March, SK Telecom’s 5G subscriber count stood at 6.74 million, accounting for 46.5% of the total. It is expected to exceed 9 million by the end of this year. In the second half, the company plans to launch an integrated subscription service along with a new subscription marketing platform.

◇ Investment Pressure and the Task of Completing Corporate Split

Despite these results, SK Telecom cannot simply celebrate. Complaints about 5G quality persist, and issues such as delays in building 28 GHz base stations, known as ‘real 5G,’ remain challenges for the leading domestic telecom company.

Earlier, the three telecom companies committed to building and opening a total of 45,000 base stations by this year, with 15,000 each, after being allocated the 28 GHz frequency band in 2018. However, the number of base stations built so far falls far short of this target. Telecom companies are reluctant to invest due to the lower-than-expected utility of the 28 GHz band and unoptimized communication equipment. Concerns are mounting inside and outside the industry that this could become a burdensome asset worth tens of trillions of won due to lack of real demand, but the government continues to pressure the construction of the 28 GHz network.

SK Telecom also faces the important task of completing its corporate split into a telecom company and a holding company this year. The IPOs of subsidiaries such as the app market One Store, ADT Caps, 11st, and WAVVE are also anticipated. This is a time when company-wide capabilities must be concentrated. Yoon Poong-young, SK Telecom CFO, stated, "We will complete the board decision-making process related to the split within the first half of the year," adding, "We will accelerate the growth of New ICT subsidiaries and maximize shareholder value."

Going forward, the SK Telecom surviving company will focus on new businesses such as artificial intelligence (AI) based on telecommunications, while the newly established ICT investment specialist company will actively pursue domestic and international investments centered on semiconductors. The surviving company, led by AI and digital infrastructure, will oversee SK Broadband and concentrate on existing telecommunications and IPTV businesses. It will expand AI technology across all ICT areas and accelerate new businesses such as cloud, data centers, and AI-based subscription services. The investment company, launching with about 100 employees by the end of this year, will oversee SK Hynix, 11st, and focus on expanding non-telecom new businesses such as semiconductors, mobility, and commerce.