Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SK Telecom Co Ltd (SKM, Financial) reported a 2.7% year-over-year increase in consolidated revenue, reaching KRW4.4224 trillion.
- Operating income rose by 16% year-over-year to KRW537.5 billion, driven by cost stabilization and one-off profits.
- The AI infrastructure domain saw a 20.5% year-over-year growth in data center revenue, fueled by AI-driven demand.
- The company has made significant investments in AI, including $200 million in SGH and $10 million in Perplexity, enhancing its AI capabilities.
- SK Telecom Co Ltd (SKM) achieved a 29% year-over-year revenue growth in its IoT business and a 28% growth in its cloud business.
Negative Points
- Despite strong financial performance, the company's high level of shareholder returns has not been adequately reflected in its corporate valuation in the stock market.
- The competitive landscape remains challenging, with increased number transfers due to regulatory changes and public interest in handset subsidies.
- The company faces significant investment requirements to continue its AI transformation and maintain its competitive edge.
- There is uncertainty regarding the impact of regulatory changes on the market size and profitability in the long term.
- The company needs to balance investments for growth, shareholder returns, and financial stability, which may limit immediate resource allocation flexibility.
Q & A Highlights
Q: Can you elaborate on the factors behind your good results for the second quarter, particularly related to the one-off profit you recognized and your outlook on the bottom line trend in the second half of the year?
A: Several factors contributed to our strong Q2 results. The growth of our 5G subscriber base and pay TV market, along with positive outcomes from our AI and new growth businesses, including AI data centers, were significant. We also improved business fundamentals and efficiency in our profit structure, balance sheet, and cash flow. Additionally, we recognized a one-off gain from our patent pool, which added to our earnings. Moving forward, we will continue to invest in AI while improving our bottom line through enhanced business fundamentals and AI transformation. (Yang Seob Kim, CFO)
Q: What are your projections on the competitive landscape, especially with the upcoming new iPhone release?
A: Regulatory changes and increased public interest in handset subsidies and marketing expenses have led to a slight increase in number transfers. However, this has had little impact on market size or profitability. As the 5G market matures, competition is shifting from subsidies to price plans and differentiated services. We will focus on strengthening our competitive edge through AI capabilities, target marketing, and cost-efficient AI customer centers. (Kyung-Il Park, Head of Marketing Strategy)
Q: How do you plan to utilize additional resources from improved earnings, especially in balancing liabilities, shareholder returns, and AI investments?
A: We expect to generate additional resources over the next three to five years. These will be allocated towards future growth investments, increasing shareholder returns, and improving financial stability. Investments will follow our AI Pyramid Strategy, focusing on profitable areas. We aim to maintain a stable dividend level, conduct share buybacks, and reduce borrowings to enhance financial stability. (Yang Seob Kim, CFO)
Q: Can you comment on which AI businesses you believe will be most profitable and elaborate on your Edge AI plans?
A: AI data centers, AI B2B, and AI B2C are the main areas for profitability. AI data centers can generate revenue immediately, while AI B2B and B2C will follow through partnerships and service upgrades. Edge AI, which delivers AI computing using telco assets, offers new opportunities by providing superior response time and security compared to centralized AI data centers. We are working with global tech companies to develop efficient AI computing solutions. (Keun-joo Hwang, EVP, Head of Strategic Planning Division)
Q: When do you expect more materialization of results from your AI businesses, and what are your expectations for your investment in Perplexity?
A: We aim to generate profit in AI data centers, AI B2B, and AI B2C. AI data centers can post sales immediately, while AI B2B and B2C will follow through partnerships and service upgrades. Our $10 million investment in Perplexity, an AI search engine company, will help develop user-friendly AI agents and enhance AI search capabilities. We plan to integrate Perplexity's technology into our services, offering optimized AI search experiences. (Yang Seob Kim, CFO and SG Chung, Head of AI Growth Strategy)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
