[Weekend Money] Let the Past Be the Past... SKT, Earnings That Left Will Return

Returning Subscribers from KT
Full Recovery to Pre-Leak Earnings Expected
Tax-Exempt Dividends Add to Dividend Yield Hopes

Yonhap News Agency

SK Telecom, which went through its worst period in terms of both public opinion and performance due to the customer information leak incident, is now on the verge of a rebound. Analysts say the company may be able to achieve both a normalization of earnings and a recovery of dividends to its usual level.

Letting the Past Be the Past

Its earnings in the fourth quarter of last year were the worst on record. On a consolidated basis, revenue came to 4.3287 trillion won and operating profit to 119.1 billion won. Compared with the same period a year earlier, revenue fell by 4.1% and operating profit plunged by 53.1%. This was due to the cost of the customer appreciation package that continued through the end of last year, as well as approximately 230 billion won in one-off personnel expenses related to voluntary retirement at SK Telecom and SK Broadband.

The standalone figures were also bleak. Revenue stood at 3.0837 trillion won and operating profit at 130.8 billion won, tumbling 3.3% and 27.1%, respectively, from a year earlier. Due to subscriber losses caused by the cyber intrusion incident and revenue deductions stemming from the compensation plan, mobile service revenue dropped to 2.538 trillion won, down 4.6% year-on-year. However, when competitor KT also suffered a customer information leak incident in January and waived early termination fees, it is believed that many of the subscribers who had left returned to SK Telecom. In a market with few substitutes, users ultimately churn back and forth and end up returning to where they started.

Earnings Seen to 'Fully Recover' This Year

The market consensus among securities firms for SK Telecom’s earnings this year is revenue of 17.7615 trillion won and operating profit of 1.856 trillion won. This represents increases of 3.87% in revenue and 72.9% in operating profit from last year, and it is projected that earnings will fully recover to the level seen before the customer information leak incident. In fact, operating profit is expected to surpass the 1.8234 trillion won recorded in 2024. This is because the company has already cleared out last year’s large one-off expenses and is also expected to see results from its artificial intelligence (AI) business this year.

SK Telecom is building an AI Data Center (AIDC) in Ulsan, and is expected to expand the business further by adding another data center in the Seoul area this year. Analysts say the company will boost its performance by restoring profitability in its telecommunications business while focusing on restoring the self-sustainability of its AI business.

Strong Commitment to Dividends as Well

SK Telecom has stressed that it will place the highest priority on normalizing earnings this year and will work to restore dividends to their usual level. In addition, the company is reportedly considering tax-exempt dividends (capital reduction dividends). By reducing capital surplus instead of retained earnings and using it as a source of dividends, shareholders would not have to pay the 15.4% dividend income tax. This is expected to effectively increase the dividends they actually receive.

In this case, analysts say a dividend of around 3,540 won per share for 2024 is fully achievable. Based on the intraday share price of 68,500 won recorded on the 6th, the dividend yield would be close to 5.2%. Even if the share price rises further, a dividend yield in the 4% range is still considered attainable.

Against this backdrop, Yuanta Securities has set its target price for SK Telecom at 100,000 won. Lee Seungwoong, an analyst at Yuanta Securities, said, "We took into account that in the past, when earnings were improving and dividends per share (DPS) were being raised, the share price climbed until the dividend yield reached around 4%, and we also reflected 2 trillion won as the value of its stake in the U.S. AI company Anthropic," adding, "Judging from recent developments within the group, there is also room for the possibility that the Anthropic stake could be monetized in cash over the medium to long term."