1
SK Telecom transitioning for value growth
SK Telecom’s competitive advantage will further magnify as the market cools down
EV to appreciate in-line with ARPU turnaround; LTE ARPU, an important indicator
LTE network efficiency and longer use of technology to enhance MNO growth and profitability
Rapid paradigm shifts from fixed to mobile provides significant growth potential in mobile
games, ad and commerce; SK Planet’s current value estimated at 1~2 trillion Won
B2B solutions, healthcare and fixed/mobile IPTV businesses to show strong growth
SK Telecom‟s competitive advantage to amplify as market competition stabilizes
Since 2007 the market experienced heated competition when WCDMA network and smartphones were
introduced. But as the respective penetration rates reached 30~40%, market competition subsided. A
pattern which is expected to be replicated in the LTE market next year
In addition, reduction in costly subscriber acquisition activities and increased focus on retention and
internal handset upgrades are expected as:
each mobile operator completes their nationwide LTE network rollout,
high-ARPU LTE subscribers‟ contracts start to mature, and
SK Telecom‟s (“SKT” or the “Company”) introduction of early contract-termination penalty policy this
November (other operators are expected to follow suite) reduces market mobility
The expected launch of iPhone5 may spark competition, but considering that the entire iPhone market in
Korea is estimated at around 5%, the impact is expected to be limited
WCDMA, Smartphone, LTE Penetration and Marketing Expense Trend
2
SKT
64%
44%
19%
19%
16%
47.0% 45.2% 50.2%
14.6%23.5%
28.5%38.5% 31.3%
21.3%10%
30%
50%
1Q12 2Q12 3Q12
Given operators‟ core competitiveness and subscriber base,
the most significant assets, the market is expected to revert to
the previous structure over the mid- to long-term, with SKT
maintaining its No. 1 market position
As the market stabilizes, SKT‟s numerous competitive
advantages, including service offerings, network quality, and
customer services, will become more pronounced
No. 1 in three major customer satisfaction surveys for 13 consecutive years
SKT, the clear overall leader in the telecom industry, has been ranked first by NCSI (National Customer
Satisfaction Index) and KCSI (Korea Customer Satisfaction Index) for 15 consecutive years and by KS-SQI
(Korean Standard Service Quality Index) for 13 consecutive years
These awards clearly indicate SKT‟s inherent competitive edge in call quality, wireless internet and handsets
offering, and an unmatched customer service experience
Note: Total customer satisfaction scores for each respective survey
SKT‟s differentiated services continue to contribute to increasing customers‟ mindshare. In a recent survey by
Cetizen, of nearly 3,400 people who intent to buy an iPhone5, 64% chose SKT as their preferred service
provider. The primary deciding factors mentioned were LTE quality, membership benefits, and customer
services
Preferred Operator for iPhone5 Reasons for Preferring SKT
Source: Cetizen.com, Oct., 2012
LTE Net-add Market Share
LTE Quality
Membership
Others
AS & CS
SKT
KT
LGU+
NCSI KCSI KS-SQI
3
33
52
0
10
20
30
40
50
60
Blend LTE
3Q12 ARPU
EV will increase as ARPU rises
In the past, the growth of the telecom industry was largely driven by rising penetration rates and ARPU.
As the penetration rate reached saturation, the primary telecom value driver started to mirror ARPU trends,
which slid due to tariff cuts and emergence of disruptive business models
However, the recent reversion to a positive sloped ARPU, a trend that is expected to continue for some
time, will continue to enhance the value of telecom operators
LTE ARPU is the main indicator of future growth
SKT‟s total ARPU is expected to show a prolonged period
of positive growth. The Company leads the LTE market
with over 6 million subscribers as of October, but due to
its large +26 million subscriber base, the proportionate
growth is slow. However, the fact that SKT‟s LTE ARPU is
nearly 60% higher than the blended ARPU allows the
Company to enjoy an overall ARPU growth over an
extended period
SKT continues to realize over 2/3rd of new LTE subscribers
signing up for the LTE62 (monthly plan of 62,000 Won) or
higher price plans. Furthermore, the Company is
confident that it will maintain the highest LTE ARPU in the
Korean market, as was the case with 2G and 3G ARPUs
LTE network efficiency to improve profit prospects
The LTE network is more efficient from a cost and technological standpoint compared to that of 3G, i.e. it
is more effective in managing data and expectations are that the LTE will remain as the primary
technological platform for a significantly period of time
Compared to 3G technology, LTE‟s spectral efficiency is 3-times greater and increases further with the use
of LTE-Advanced, which boasts a significantly higher data throughput speed. In addition, LTE equipment is
data-centric, therefore is less expensive than the voice and data-based 3G equipment
Transmission Speed Comparison among Networks & Technologies
WCDMA(R4) HSDPA(R5) LTE(R8/R9) LTE-A(R10)
Commercial deployment Dec. 2003 Apr. 2006 Jul. 2011 2H12 (expected)
Bandwidth 1FA 2 X 5MHz 2 X 10MHz 2 X 40MHz
Speed (DL/UL) 2M/384Kbps 14.4M/384Kbps 75M/23.5Mbps 600M/188Mbps
Note: LTE - 2 X 2 MIMO (Antenna technology, “Multiple Input Multiple Output”), LTE-A - 4 X 4 MIMO
„000 KRW
4
Given that discussion for 5G technology has yet to begin, SKT expects 4G to be the primary mobile
platform for about 10 years (from concept develop to standardization, it takes approx. 5 years, and another
5 years for commercialization). Whereas, the previous 2G and 3G networks were followed by successive
technologies within 5~6 years of commercialization
Technology Standardization Trends
LTE(R9) LTE-A(R10) LTE-A(R11) LTE-A(R12)
Time of standardization
discussions ~‟09.12 ~‟11.3 ~‟12.9 ~‟14.6
Note: The greatest difference between 3G and LTE technology is the adoption of OFDM and MIMO technology. There are no indications of such
significant technological changes and discussion for 5G has yet to take place
5
SK Planet‟s leading position in the expanding mobile games, advertising and
commerce markets to contribute SKT‟s corporate value growth
IDC projects by 2016, more global Internet users will access the Internet through mobile devices than
through PCs
Cisco expects the average mobile network speed to increase 9-fold to 2.9 Mbps by 2016, up from
315 Kbps in 2011, and that the number of mobile devices will exceed the world population of 7 bn
in 2012 and reach over 10 bn by 2016
In Korea, LTE penetration is expected to reach over 70% by 2015, up from 25% in 2012
In anticipation of such market developments in the mobile space, SKT spun-off SK Planet last year.
Leveraging its rich experience in mobile contents and services, SK Planet (“SKP”) continues to solidify its
leading position as No.1 mobile platform player
This section will focus on SKP‟s market position in the rapidly growing mobile games, advertising and
commerce businesses
T store: Developing and expanding the Digital Content Marketplace with mobile games
As evidenced by the recent popularity of SNS-based games in Korea, the spread of smartphones is
spurring growth of the mobile-games business. This is largely in-line with growth projections for overseas
and Korean mobile games markets CAGR of 17.7% and 54.1% YoY, respectively by 2015
Given the ① the portability of mobile devices, ② continued improvements in network and devices, and
③ the increasing use of mobile platforms such as mobile SNS, the growth of mobile games market is
likely to exceed expectations
While intensifying competition among mobile game developers is increasing development risks and
pressuring margins, mobile platform companies are exposed to less risk and enjoy much more stable
profits
SKP has made a solid entrance in the mobile games market segment and is expanding into video, music
and e-books. By continuing to differentiate its mobile platform, SKP aims to expand its Digital Content
Marketplace globally. In 3Q12, T store, the largest app platform in Korea with nearly 360,000 listed items
and over 17 mn users, reached the 1 bn cumulative download milestone with sales of games accounting
for 60% of T store‟s revenues
To further differentiate T store‟s game offerings, SKP plans to expand into game publishing business in
order to secure games on a preferred status. Furthermore, through partnerships with SEGA and TAT JOY
(No.1 global platform advertising company), SKP is strengthening its global game sourcing base to
improve its competitiveness and profitability
6
T ad: To monetize core SKP businesses to pursue growth
Mobile ad market is still in its infancy, overlooked by advertisers due to the perceived lower adverstising
impact over the smaller screens of mobile devices. However, as the reach of mobile devices continues to
expand, and consumers‟ usage pattern becomes increasingly mobile-centric vs. PCs, the focus will shift to
the rapidly growing mobile ad market
Globally, the mobile ad market is projected to jump from $6.4 bn in 2012 to $23.6 bn in 2016. The
Korean market, ranked 4th following the United States, Japan, and the United Kingdom, is expected to
grow from $0.45 bn in 2012 to $0.76 bn in 2016 (eMarketer, Jul. 2012)
SKP‟s T ad business is well positioned to capitalize on this growing mobile ad market, further enhancing its
ad business portfolio of SMS/MMS push ads, LBS ads and in-app. ads. In-app. ad is rapidly becoming
one of the preferred mobile ad segments with hits on SKP reaching 6.5 bn monthly page views in 3Q12
SKP‟s competitive advantages in the mobile ad market stems from ① T store, Korea‟s No. 1 apps
marketplace, which boasts a significant reach, ② its expansive customer base, largest in Korea, that allows
for effectively target marketing, and ③ its years of experience in the mobile industry. In 2013, SKP plans
to leverage its strengths and assets to intensify efforts by entering the SNS ad market and utilizing its
various platforms such as T map, Cyworld, NateOn and 11th street to pursue an integrated new media ad
business
Games
60%
VOD
20%
Other
20%
T Store Sales MixMobile Game Market
Overseas market CAGR: 17.7%
tn Won
320450
540620
690760
0
250
500
750
1,000
11 12E 13E 14E 15E 16E
Korean Mobile Ad Market
Source: eMarketer, Jul. 2012
$ mn
1.3
6.5
0
2
4
6
8
3Q11 3Q12
bn PV
T ad In-app. ad Metric
tn Won
Korea market CAGR: 54.1%
Source: IDC 2012, Gartner and Samsung Securities
7
Mobile 11th street: Outright leader in the m-commerce market
According to Gartner, global mobile commerce market is projected to grow from $73.5 bn in 2012 to
$234.1 bn in 2015. The Korean market is also forecast to show strong growth. Daishin Securities
anticipates the market size to jump from 1 tn Won in 2012 to 2.5 tn Won in 2015
A recent survey by KCC (Korea Communications Commission) of smartphone usage patterns found over 60%
of smartphone users surveyed have used mobile shopping and 35.5% of those users mobile shop at least
once a week. Future growth prospects of the mobile commerce market continues to gain momentum
due to increases in ① accessibility of mobile shopping, ② regulatory ceiling for mobile device-based
payment (Currently, 300,000 Won), and ③ awareness/acceptance of and enhanced security of mobile
payment
SKP‟s mobile 11th street is Korea‟s leading mobile open-market shopping destination with more than 50%
of the market. Through 3Q12, SKP recorded over 11 million download of the 11th street app. and
cumulative GMV (Gross Merchandise Value) more than twice that of last year‟s total of 81 billion Won
Mobile 11th street, optimized for smartphones, has a friendly user-interface that makes it convenient to
search and buy product over a secure payment process. Its marketing in conjunction with OK Cashbag,
Korea‟s largest membership program, will further differentiate mobile 11th street, which expects GMV to
more than double in 2013
0.6
1.0
1.4
2.0
2.5
0
1
1
2
2
3
3
11 12E 13E 14E 15E
Korea m-Commerce Market
Source: Daishin Securities
Note: The market is composed of openmarket, and various
shopping malls, including social and specialty malls
tn Won
0
20
40
60
80
3Q11 4Q11 1Q12 2Q12 3Q12
Mobile 11th street GMVbn Won
8
SK Planet‟s current value estimated at 1~2 tn Won
The primary businesses at SKP; T store, 11th street and T map, are on a firm growth path. Especially in the
mobile space where the market is rapidly evolving to higher speed networks and adoption of smartphone
devices continues to quicken
Sums of the parts comparison valuation of SKP‟s businesses, including its listed subsidiaries indicate a
potential value in excess of 2 trillion Won. Given that the company is still in its initial growth phase, the
financial multiple-based valuation is premature. However, even on EV/EBITDA and PER comparisons to
possible Asian peers place its value at 1.1-1.6 trillion Won.
Sum-of the-Parts Valuation
Business Basis of valuation SK Planet
1)
Company Metric EV (tn Won) Metric EV (tn Won)
T store2)
Cumulative downloads
750 m 0.12
Cumulative
downloads: 1,240 m 0.2
11th street3)
Market share 39.2% 1.6 Market share over 30% 1.27
Hoppin4)
2 m paying subs 2.2 110K paying subs 0.12
SK Comms Market cap. 305.7bn Won (Nov. 16, 2012) Ownership 64.6% 0.20
Loen Market cap. 342.7bn Won (Nov. 16, 2012) Ownership 67.6% 0.23
T ad 400% YoY increase in in-app ads to 6.5 bn PVs in 3Q12
Korea mobile ad market size to reach $540 m in 2013 (eMarketer) α
T map Monthly active users of 5.85 m. Use of location API for B2B solutions
business. Cooperative efforts with global car makers (Renault Samsung) α
Tic Tok (SNS) Registered users of 10.25 m, 16 m app. downloads
(Global launch of Tic Tok Plus in Oct. 2012) α
Implied SK Planet value 2 + α
1. Based on expected 2012 results
2. Appia, provider of +140,000 apps in approx. 175 countries, is an independent app/content marketer who secured funding on Mar. 2011 3. Valuation attributed to G market when eBay acquired the company in Apr. 2009 4. Valuation of Hulu when the major shareholders bought shares from existing shareholders on Apr 2012
Asian Peer Multiple Valuation
EV/Sales EV/EBITDA PER
Asian Peer1)
Median ~ Mean (x) 3.0 ~ 3.5 7.3 ~ 8.9 15.8 ~ 18.0
Implied SK Planet value2) (tn Won) 3.2 ~ 3.8 1.3 ~ 1.6 1.1 ~ 1.3
1. Based on 19 Asian Internet/software companies
2. Based on expected 2012 results
9
1.1
1.5
3.0
15%
20%
50%
0%
50%
100%
0
1
2
3
11 12E 15E
B2B
Solution portion
tn Won
B2B solution business to show strong growth as ICT development spurs innovations in
connectivity
The proliferation of the smart devices and advancements in ICT technology such as HTML5 and NFC are
stimulating demand for connectivity and accelerating convergence in the ICT space. As such, there has
been a steady rise in need for various B2B solutions
Indeed, with the B2B solutions business showing strong double-digit growth, SKT expects solution
revenues to contribute 50% to total B2B revenues by 2015. The five core business segments that SKT is
focusing are Smart Store, Smart Work, Smart Cloud, Green & Safety, and M-Ad & Payment
SKT B2B Sales Forecast Core solution business
Aging population, advancements in ICT and medical technologies provide significant
upside potential for healthcare
Rising average age of the population, increasing social
awareness of health-related issues, coupled with
advances in ICT and medical technologies have created
a rapidly growing healthcare industry. By 2014, the
Korean healthcare market is expected to move above 3
tn Won, largely driven by growth in general healthcare
management needs
To take part in the rapid growth of the healthcare
industry, SKT is focusing on gaining core competencies
in diagnostic and healthcare management. To this end,
it ① invested in NanoenTek, a PoCT (Point of Care
Testing) device company, ② established a joint venture
with Seoul National University Hospital called „Health
Connect‟, and ③ invested in a Chinese molecular
diagnostics device company, Tianlong in Sep.
SmartStore
M-Ad &Payment
SmartWork
Green &Safety
5 CoreSolution
SmartCloud
1.0
2.0 0.3
0.6
0.3
0.5
10 14E
Silver
Medical
Wellness
Source: Korea Health Industry Development Institute
Welness : Healthcare services to the general public
Medical : Diagonosis and treatment services for the ill
Silver : Medical services to seniors, over 65, or the disabled
Domestic Smart Healthcare Market
tn Won
3.1
1.6
10
Strong growth potential for IPTV as digital broadcasting becomes the standard and
market acceptance of mobile IPTV expands
By 2015, Korea‟s broadcasting market is
projected to rise to 3.6 tn Won with mobile
contributing another 0.5 tn Won. As the fixed
IPTV user-base continues to expand and the
robust LTE network continues to spur growth of
mobile IPTV, SKT‟s IPTV service subsidiary
promises to show meaningful growth
0%
20%
40%
60%
0
2
4
6
8
10
9 10 11 12E 13E 14E
Subs
IPTV/High-speed internet
Korea IPTV Market
Source: Hyundai Securities
m
11
Summary
MNO business poised to show value growth
Prospects for profitability continue to improve following the early LTE market competition. As
implied in overwhelming lead in customer satisfaction surveys, SKT‟s competitive advantage in
network, service offerings and customer services will only magnify as the market stabilizes
The ARPU uplift impact of LTE, pushing up overall ARPU for the first time in many years, points to
rising corporate value. SKT leads the industry with the highest LTE ARPU, and a profitable 2G and
3G subscriber base; a combination that assures extended growth and profitability
Initial LTE investments have been complete. LTE‟s higher technological and network efficiencies to
lend to a more stable investment environment
SK Planet, one of SK Telecom’s growth pillars, contributing to growth and corporate value
SKP aims to become a global wireless platform company by leveraging its growing businesses;
Digital Content Marketplace, commerce and social network
SKT is confident that the market will accord SKP its well earned-value as the leading mobile platform
company, contributing the SKT‟s growth
SKP‟s operating and financials implies a current EV of 1~2 tn Won
Growth of B2B solutions, healthcare, and IPTV businesses to enhance SKT’s value
Widespread use smart devices and advancements in ICT technology are stimulating demand for B2B
solutions. SKT is targeting 1.5 tn Won in solution sales by 2015
Healthcare industry is showing rapid growth on the back of increasing social awareness of/need for
healthcare, and advances in ICT and medical technologies. SKT is positioning itself with the key
players to spearhead growth in the areas of diagnostics and healthcare management services
SKT to enhance its growth momentum in the IPTV market, by strengthening its presence in the
mobile IPTV segment
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Contact Info.
IR Contacts Tel No. e-mail
Hong Kyu Park 82(0)2-6100-4509 [email protected]
Jeong Hwan (Jack) Choi 82(0)2-6100-7203 [email protected]
Dong Seop Kim 82(0)2-6100-1464 [email protected]
Seung Oh Yoon 82(0)2-6100-1632 [email protected]
Hun Lee 82(0)2-6100-1334 [email protected]
Woo Sun Cho 82(0)2-6100-1638 [email protected]
In Kyoo Joo 82(0)2-6100-1625 [email protected]
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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).