SK Telecom Co., Ltd. Q3 FY2024 earnings call

• SK Telecom has an AI Pyramid Strategy with three main ways to generate AI profit: AI data centers, AI B2B, and AI B2C.
• Consolidated operating income was KRW 533.3 billion, up 7.1% year-over-year, with net income at KRW 280.2 billion. Nonconsolidated operating income was KRW 457 billion and net income KRW 222.4 billion.
• Data center revenue grew 14% YOY due to higher utilization; aim to be a leader in global AI data center market. Established AI infrastructure super highway to accelerate Korea's AI ecosystem.
• Implemented major changes to A. app in August, with cumulative downloads exceeding 5.5 million by end-September. Upgraded T Phone to A. phone and launched PC version of multi-LLM agent.
• MNO business focuses on attracting and retaining high ARPU subscribers. Enterprise business grew 8% YOY, cloud business 30% YOY. Enterprise AI business winning meaningful orders.
• DPS for Q3 was 831, same as Q2; committed to stable dividend trend.

Consolidated revenue for Q3 2024 was KRW 4,532.1 billion, up 2.9% year-over-year. Nonconsolidated revenue was KRW 3,203.2 billion, up 1.7% year-over-year. Data center revenue grew 14% year-over-year. In the MNO business, 5G subscribers reached 16.58 million as of end-September 2024, accounting for 73% of the total subscriber base. SK Broadband had 9.62 million pay TV subscribers and 7.11 million broadband subscribers as of Q3 end. Enterprise business sustained an 8% year-over-year growth, and cloud business saw a 30% year-over-year revenue growth.

• Aim for AI Vision 2030 with total revenue of KRW 30 trillion and AI portion of 35% by 2030.
• Plan to launch telco-specific LLM commercially in H1 2025 and establish global AI joint venture for LLM service.
• Test global marketability of global TAA via closed beta testing within 2024. Develop specific action plans for value-up plan and monitor implementation regularly.

• In Q3, consolidated net income fell ~9% YOY due to recognition of valuation losses from investment assets as nonoperating expenses, but these are one-off nonrecurring items.
• Forward-looking statements subject to change based on market and macro situations.

Q: When we look at the earnings results for the third quarter, we see that there's a larger recognition of nonoperating losses, which has led to a smaller net income. I wonder if this will have any substantial impact on your year-end dividend? The second question has to do with your corporate value-up plan, which you announced recently. However, SK Telecom is not included in the value-up index. So I would like to understand your responses to that situation and the background behind your disclosure of the corporate value-up plan?

A: Yang Seob Kim responded that year-end dividend depends on fourth quarter earnings and BOD deliberation, but valuation losses are one-off and won't affect dividend calculation. Regarding value-up disclosure, it's the first year for such disclosures, plan was prepared to show future vision and enhance investor recognition, aiming to improve ROE, maintain shareholder return policy, and achieve AI Vision 2030 targets.

Q: As you mentioned already, SK Telecom has been pursuing diverse businesses regarding and using AI. And I'd like to understand AI's contribution to your earnings and also the directions for your AI service development and business models. The second question has to do with the Perplexity Pro promotion. And I understand that this promotion has been receiving positive response in the market. So what kind of benefits did you reap from this promotion, maybe in terms of the increase in the number of subscribers to A. or contributions to the earnings overall?

A: Yang Seob Kim discussed AI monetization in three domains: data centers, B2B, B2C. The A. app overhaul and Perplexity promotion showed market interest. The Head of AI Growth Strategy mentioned Perplexity Pro promotion gained many customers quickly, and collaboration with Perplexity is ongoing for technology development and broader subscription plans.