Are You A Homo Hertzian? Are You A Homo Datum?

Transcription

1 Company Report Vol. 5 Dec. 213 Are You A Homo Hertzian? Are You A Homo Datum? Partner for New Possibilities

2 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 2-F and in the Company s other filings with the U.S. Securities and Exchange Commission (SEC).

3 Table of Contents Introduction Radio Devices Key Drivers for Mobile Data SK Telecom s Competitiveness

4 Introduction Ever since man started to walk, we have since learned to use tools and languages. More recently the discovery of radio frequency, and its expanding applications continues to improve the quality of life Homo Erectus Homo Hertzian* Man using radio frequency Homo Faber Homo Loquens Homo Datum Man using data Homo Ludens * Homo Hertzian, a term used by KBS (Mar. 213) in the TV program Radio frequency races into the future 3

5 Introduction Are You A Homo Hertzian? New applications of wireless technologies is influencing one s habits and the daily routine In the near future the Home Healthcare System will automatically measures weight, body fat percentage, blood sugar level, and other medial vitals and send it to the hospital. The kitchen touch table shows a selection of recipes and status of perishable goods. The wearable devices will communicate with various telecommunication instruments to keep the user informed [Services using radio frequency] Healthcare Home Healthcare System automatically monitors medical vitals such as weight, body fat percentage, amongst other, as well as compile and send data to the doctor and/or hospital Touch Table The kitchen table that uses RFID (Radio Frequency Identification) technology, recommends foods and recipes, expiration dates of perishable goods and daily schedule Wearable Device Devices such as smart glasses and watches communicate with surrounding sensors, instruments and access the web via various mobile technologies including Bluetooth and Wi-Fi In-building Sensor Control System Auto Logistics Mgmt. System Unmanned Automobiles M2M/ IoT* * M2M: Machine to Machine, IoT: Internet of Things 4

6 Radio Devices Transformation Continues Development of the telecom industry, especially the Internet and mobile connectivity continues to expand its influence to education, health and other segments of society Past Present Telecom devices and medium were location specific, expensive and mass communication platforms were omnidirectional, often representing opinions of a few Society today encourages communication, expression of thought and opinion Mobile communication has become a norm with devices enabling communication anytime and anywhere. Form of communication has also expanded to data, thus expanding the communication platform to various SNS and video [ Key IT topics in 214 ] Mobile (Smartphone) Cloud Future Technological development is making the term Ubiquitous a reality, allowing access to information 24/7. Future quantum leaps in communication technology will continue to expand the limits of possibilities Big Data 5

7 Radio Devices Increasing Fixed Displacement Increasing wireless speeds and expanding array of wireless devices continues to displace fixed services Increased personalization, entertainment value of smartphones will play a larger role as the dominant entertainment platform [Worldwide telecom service market(us$ Bil.)] [ Must-have media platform by age group] 1,4 1, Tee n 2.6% 45.9% 3.8% 2.7% 1, 35 2s 15.9% 5.7% 3.7% 2.7% s 36.4% 33.6% 27.6% 2.4% s 5s 58.7% 81.% 19.3% 18.4% 8.3% 6.3% 3.6% 4.4% % 2.6% 2.1% 2.4% Mobile Services(LHS) Consumer Fixed Network Services(RHS) TV Smartphone PC/notebook Others Source: Gartner, Oct. 213 Source: KCC, 213 6

8 Radio Devices Changing Businesses Mobile usage is changing the way we access data and the businesses strategy 1 [Mobile usage(%)] 6 [Total spent time on Naver (mil. hr)] Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Naver (portal) Youtube (Video) Facebook (SNS) PC Mobile [Total spent time on Youtube (mil. hr)] [Total spent time on Facebook (mil. hr)] Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 PC Mobile Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 PC Mobile Source: Korean Click 213 7

9 Radio Devices Are You A Homo Datum? Do you use a smartphone? When and where do take your smartphone? What do you do with smartphone? Do you have another wireless device? Usage Frequency Studies in Korea, USA and Japan showed increasing dependency on smartphones, PCs and TVs World mobile traffic forecast (1 18 Byte/month) Popular Services The list of services continues to lengthen, including stock trading, SMS/MMS, SNS, VOD, music, education, shopping and web surfing Preferred LTE-A services 38.1% Top-5 LTE traffic services LTE market data traffic (TB) 53,578 1 TV Broadcast 37.4% 45,532 Source : CISCO, VOD download 32.3% 3 Music Download 23.3% 18.% 4,53 [Big trend] 4 P2P Download 22.% 5 Education(VOD) 18.4% 6 Shopping 17.% 7 Stock Trading 15.% 8 Blogging 1.2% Source: SK Telecom, May 213 (includes multiple responses) Multimedia WEB 16.9% Portal Source: SK Telecom, Oct % SNS 3.4% Game 27, Source: Ministry of Science, ICT and Future Planning ( MSIP ) Mobile Data 8

10 Radio Devices Voice vs. Data Data, especially 4G, allows for wider breadth of services, better economies and monetization potential [ Voice] [ Data ] Circuit switch: Digitized voice information delivered over 1-to-1 dedicated connection Packet Switch: Multipoint origination and destination Speed: 2G (9.6Kbps), 3G (12.2Kbps) Speed: 4G to follow 75Mbps 15Mbps 225Mbps 3Mbps evolution path Time-based billing Tiered-pricing based on consumption, enabling usage-based monetization Characterized as a commodity good Perceived as a Value Added Service Relatively quick evolution from 2G to 3G Lengthy 4G lifespan; 5G commercialization expected in 22 9

11 Key Drivers for Mobile Data Subscribers SK Telecom ( SKT ) is the dominant player in the rapidly emerging data landscape [Smartphone users*(mil.)] [LTE users(mil.)] Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 SKT A co B co SKT A co B co 6 5 [Smartphone user* M/S(%)] [LTE user M/S(%)] Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 SKT A co B co SKT A co B co Source: MSIP * Smartphone users include LTE users 1

12 Key Drivers for Mobile Data Network Technology SKT is at the leading edge in network and wireless technologies, as evidenced by the world s first demonstration of 225Mbps Wideband LTE-A LTE (MC) LTE-A (CA) Wideband LTE Wideband LTE-A 1MHz 1MHz 1MHz 1MHz 1MHz 2MHz 1MHz 2MHz Max. 75Mbps Max. 75Mbps Max. 15Mbps Max. 75Mbps Max. 15Mbps Max. 225Mbps SKT 8MHz 8MHz 8MHz 8MHz A Co. B Co. 8MHz - 2.1MHz 8MHz 9MHz 2.1MHz 9MHz 8MHz 2.6MHz N/A Nationwide 84 cities Requires new roll-out Note: Based on publicly disclosed information 11

13 Key Drivers for Mobile Data LTE Network Capex efficiency will be a bigger differentiating factor in LTE; the ability to timely deliver a efficient and reliable network with envelope coverage and robust capacity [ Coverage ] [ LTE Subs( 13.9) ] Seoul + metropolitan 84 Cities Nationwide 3rd SKT 12.3 mil. 8 MHz 3rd A Co. 9MHz* 9MHz 6.8 mil 2.6GHz 2.6GHz B Co. 2.1GHz 8MHz 6.6 mil. * 6 major cities (9/14~) Note: Based on publicly disclosed information 12

14 SKT s Competitiveness ARPU Growth Data growth to drive ARPU 34.9 Blended ARPU (KRW ) YoY 5.4% (E) 211.4Q 212.1Q 212.2Q 212.3Q 212.4Q 213.1Q 213.2Q 213.3Q 213.4Q 213 blended ARPU expected to show c. 4% YoY growth ARPU to maintain growth trajectory, driven by subscriber migration to LTE services, increase in data usage, upgrading to higher tariff plans and take-up of LTE packaged services LTE subscribers to represent c. 5%, 65% and 7-75% of total subscriber base in 213, 214 and 215, respectively Average data usage per LTE subscriber continues to rise; Dec GB, Dec GB, Sep GB Majority, +7%, of LTE and LTE-A gross adds and upgrading subscribers select the higher LTE69 tariff plan LTE ARPU remains at a higher KRW 46, Packaged LTE video service, T Life Pack attracted 2, users one month after launch 13

15 SKT s Competitiveness Stabilized Marketing Expenses Downward stability in marketing expenses as retention-oriented marketing takes center stage Marketing Expenses (KRW bn) , Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 (E) Marketing expense to stabilize in line with downward trending MNP and churn MNP continues to slow; 3Q12-1,4K, 4Q12-94K, 1Q13-96K, 2Q13-93K, 3Q13 93K Churn rate expected to contract further; churn decreased for four consecutive quarters (peaked at 2.9% in 3Q12) Q13 2Q13 3Q13 Churn rate 2.7% 2.7% 2.7% 2.7% 2.6% 2.4% 2.27% 2.25% As part of an effort to retain its pool of valued subscribers, SKT enhanced its upgrade program SAC (KRW ) 3Q12 4Q12 1Q13 2Q13 3Q13 New acquisition cost Internal upgrade cost Difference

16 SKT s Competitiveness Capex Efficiency Timely spectrum deployment, optimal network architecture and proprietary network management solutions to extend SKT s lead in capex efficiency Capex/Sales (%) (E) 214 (E) SKT Industry avg. Efficient properties of 4G technology and the longer upgrade cycle to 5G (22) provide for better investment economics vs. 3G SKT has made significant investments in its LTE network, providing nationwide and 84 city coverage with 8MHz and bands, respectively. Careful network planning is expected to lead to long-term downward trending capex Additional spectrum procured in the future to be deployed to maximize capex efficiency SKT aims to extend its lead in capex efficiency by leverage economies of scale, timely and efficient deployment of spectrum and network management expertise 15

17 SKT s Competitiveness Summary SKT s competitive edge continues to widen [ Key Drivers ] [ Competitive Position ] Dominant market share Solid lead in LTE and smartphone subscribers - future growth drivers Growth in ARPU ARPU expected to show 4% YoY growth in 213 and maintain its upward trajectory Stabilizing marketing cost Paradigm shift to services and retention-based strategy to stabilize marketing expenses Network technology Lead position in provisioning of LTE-A and Wideband LTE-A network technologies - demonstrated the world s first Wideband LTE-A (225Mbps) on Nov. 28 LTE network rollout plan Efficient expansion of LTE coverage and capacity to effectively support rising LTE subscribers and data demand Cost-efficient network Best positioned to maximize yield from economies of scale and network management expertise 16