3 Q11 South Korea Mobile Forecast Executive Summary

3Q.2011 South Korea Mobile Operator ForecastSouth Korea to have 60 million mobile subscriber connections in 2015 with KT taking 31% market share

October 2011

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

INDUSTRY AVERAGE SUBSCRIBER GROWTH IN THE SOUTH KOREAN WIRELESS MARKET REMAINS AT 4%-6%

The operator-wide average subscriber growth (YoY) was 4.3% in 2Q.2011, down from 5.4% in 2Q.2010.

The largest operator, SK Telecom, saw its subscriber growth (YoY) decline from 5.5% in 2Q.2010 to 4.5% in 2Q.2011.

KT’s subscriber growth declined from 6.0% in 2Q.2010 to 4.5% in 2Q.2011, but it continues to be higher than the growth rate at LG Uplus.

LG Uplus's subscriber growth declined from 4.0% in 2Q.2010 to 3.6% in 2Q.2011.

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SK Telecom KT LG Uplus Industry Total

Chart 1: Subscriber Growth (4Q08 – 2Q11), %

Stable subscriber growth continues in South Korea4.3% industry average subscriber growth in 2Q.2011

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Source: IEMR

INDUSTRY AVERAGE ARPU IN SOUTH KOREA CONTINUES TO DECLINE

The industry average monthly ARPU was US$ 34.20 in 2Q.2011, down -2.5% YoY.

LG Uplus continues to lower its ARPU level. In particular, LG Uplus’smonthly ARPU declined by -8.2% (YoY) to reach US$ 28.60 in 2Q.2011.

KT’s monthly ARPU was US$31.73 in 2Q.2011, down -8.0% YoY.

SK Telecom’s monthly ARPU remains the highest among the operators at US$ 37.69 in 2Q.2011, up +2.3% YoY.

Chart 2: ARPU Growth (4Q08 – 2Q11), %

ARPU growth in South Korea remains negative-2.5% industry average ARPU growth in 2Q.2011

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Source: IEMR

The operator-wide average Minute of Use (MOU) per subscriber was 294 minutes per month in 2Q.2011, down -0.4% YoY.

All of the operators have similar levels of MOU. MOU per subscriber at SK Telecom, KT, and LG Uplus was 298 minutes, 281 minutes, and 304 minutes respectively in 2Q.2011.

MOU/Sub growth is negative at KT, with SK Telecom making a rebound. KT’s MOU/Sub growth was -2.4% in 2Q.2011, up from -7.1% in 2Q.2010.

LG Uplus’s MOU/Sub growth was 0% in 2Q.2011, up from -9.5% in 2Q.2010.

Chart 3: MOU/Sub Growth (4Q08 – 2Q11), %

Minutes of Use per Subscriber is decreasingIndustry average MOU/Sub is approximately 294 minutes per month

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Source: IEMR

+10.0% INDUSTRY-AVERAGE EBITDA GROWTH IN 2Q.2011

• The industry average EBITDA growth rate (YoY) in 2Q.2011 was 10.0%, down from 26.9% in 2Q.2010.

• EBITDA growth rate at SK Telecom jumped from 9.7% in 2Q.2010 to 16.6% in 2Q.2011.

• KT and LG Uplus saw a decline in EBITDA growth (YoY) in 2Q.2011.

• EBITDA growth rate (YoY) at KT was 3.0% in 2Q.2011 (down from 40.5% in 2Q.2010).

• LG Uplus's EBITDA growth also fell to 2.0% in 2Q.2011, down from 90.5% in 2Q.2010.

Chart 4: EBITDA Growth (4Q08 – 2Q11), %

Strong EBITDA growth at SK Telecom in 2Q.2011

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SK Telecom KT LG Uplus Industry Tatal

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Source: IEMR

We forecast that the number of total wireless subscriber connections in South Korea will increase from 50.8 million in the end of 2010 to 60 million in the end of 2015.

Given the latest quarter numbers, our model predicts that SK Telecom will have approximately 30.4 million mobile subscribers in 2015.

In our view, SK Telecom will continue to have a dominant position as the largest operator in South Korea with a 50.7% market share in 2015.

We expect that KT will have 18.7 million wireless subscribers in 2015 (31.3% market share).

Chart 5: Subscribers by operator (CY09 – CY15F)

So what is IEMR’s Forecast? Total mobile subscriber connections in South Korea to reach 60 million in 2015

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Source: IEMR

WE EXPECT THE OPERATOR-WIDE AVERAGE ARPU LEVEL TO REMAIN AT APPROXIMATELY KRW 37,000 OVER THE NEXT TWO YEARS

Our forecasting model does not predict major changes in the industry average ARPU for the next two years.

According to our model, the industry average ARPU will be KRW 37,042 per month in 2013.

We expect that SK Telecom’s ARPU level will continue to be higher than those of KT and LG Uplus over the next two years.

Chart 6: Average Revenue per User (ARPU) per month (CY09 – CY13F), KRW

So what is IEMR’s Forecast?ARPU levels in South Korea to remain stable

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SK Telecom KT LG Uplus Average

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Source: IEMR

Our model is predicting that, over the forecast period of 2011-2013, SK Telecom’s EBITDA margins will remain lower than those of KT and LG Uplus.

We forecast that KT's EBITDA margin (calculated as EBITDA/service revenue) will improve from 39.7% in 2010 to 41.4% in 2013.

We expect that LG Uplus’s EBITDA margin will remain at about 40% from 2012 to 2013.

Chart 7: EBITDA margins (CY09 – CY13F), %

So what is IEMR’s Forecast? SK Telecom to enjoy the highest profitability

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SK Telecom KT LG Uplus Average

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3 Q11 South Korea Mobile Forecast Executive Summary