SK Telecom Co Ltd (SKM) Q4 2024 Earnings Call Highlights: Strong Net Income Growth and AI Expansion

• Consolidated Revenue: KRW17,940.6 billion, up 1.9% year-over-year.
• Operating Profit: Grew 4% year-over-year with an operating margin exceeding 10%.
• Operating Income: KRW1,823.4 billion.
• Net Income: KRW1,438.8 billion, up 25.6% year-over-year.
• AI-Related Revenue Growth: 19% year-over-year.
• Dividend Per Share (DPS) for 2024: KRW3,540, including a quarterly dividend of KRW2,490.
• 2025 Revenue Target: KRW17.8 trillion, approximately 1% growth year-over-year on a normalized basis.

• Warning! GuruFocus has detected 6 Warning Signs with MHGVY.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SK Telecom Co Ltd (NYSE:SKM) reported a 4% year-over-year growth in consolidated operating profit, with an operating profit margin exceeding 10%.
• Consolidated revenue increased by 1.9% year-over-year to KRW17,940.6 billion, driven by growth in fixed and mobile, enterprise, and AI business areas.
• Net income rose by 25.6% year-over-year to KRW1,438.8 billion, attributed to business portfolio restructuring and asset efficiency enhancements.
• AI-related revenue grew by 19% year-over-year, with strategic investments in AI partnerships and the launch of SKT GPU-as-a-Service.
• The company maintained a stable dividend per share (DPS) of KRW3,540, reflecting a commitment to shareholder returns despite economic uncertainties.

Negative Points

• The MNO business experienced a slight slowdown in top-line growth, despite customer-friendly roaming services.
• There are concerns about the future stock price trend due to uncertainty surrounding long-term dividend payouts.
• Marketing costs have been reduced, but the market remains competitive, especially with the lifting of the handset subsidy ban.
• The AI business, while showing growth, still represents a small portion of total revenue, and tangible results are yet to be fully realized.
• The company faces significant economic, industrial, and political changes, both domestically and globally, which could impact future performance.

Q & A Highlights

Q: What are the key focus areas for SK Telecom in conducting AI business, and what is the AI-related revenue outlook? A: Yang-Seob Kim, CFO, explained that SK Telecom restructured into seven business units focusing on telecom and AI. AI-related revenue is materializing in B2B businesses like AIX and AIDC. AIX includes AI cloud and other AI B2B products, posting KRW193 billion in revenue last year, expected to grow 30% this year. AIDC revenue was KRW397.4 billion in 2024, up 13% year-over-year, with expectations for double-digit growth in 2025. The company plans to develop more concrete business models for AI B2C business, including a subscription-based service for A-Dot.

Q: Can you provide more details on the subscription model for A-Dot and the launch of Aster for global audiences? A: Jihoon Kim, Head of AI Business Strategy, stated that A-Dot is Korea's leading personal AI agent. The company plans to introduce a subscription model, focusing on daily task management and telecom features. Jae-Shin Lee, Head of AI Growth Strategy, mentioned that Aster, an AI service for global audiences, is in closed beta testing and will launch an open beta in the US in the first half of the year, focusing on daily task execution.

Q: What is the outlook for SK Telecom's marketing strategy following the lift of the handset subsidy ban? A: Ji-hyeong Kim, Head of Integrated Marketing Strategy, noted that the market has stabilized since the subsidy ban was lifted. The company will continue to offer personalized and differentiated value to customers, monitoring the market closely and adapting strategies as needed.

Q: How did operational improvements impact SK Telecom's earnings in 2024, and what is the CapEx plan for 2025? A: An unidentified company representative explained that operational improvements led to a 4% increase in operating income and reduced CapEx while maintaining a strong 5G subscriber base. The company plans to continue these improvements in 2025, optimizing CapEx for efficient network operation and strategic AI growth investments.

Q: What is SK Telecom's outlook on stock price trends and AI business profitability? A: An unidentified company representative emphasized that shareholder return is crucial, but market valuation also reflects growth potential. SK Telecom aims to demonstrate AI business competitiveness in 2025, using resources for growth investments and maintaining high shareholder returns. The company plans to introduce AI B2C services like A-Dot to strengthen MNO product competitiveness.

Q: How is SK Telecom addressing the impact of affordable AI models like DeepSeek on its AI Infrastructure and AIX business? A: An unidentified company representative stated that affordable AI models could promote AI infrastructure growth. SK Telecom plans to build efficient data centers using SK Group's capabilities, focusing on AI data center management solutions. The AIX business, including AI Cloud and B2B services, aims for 30% revenue growth in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.