Seoul, Korea, 29 July 2010 - SK Telecom (NYSE:SKM) announced its earnings for the second quarter of 2010: revenue of KRW 3.089 trillion, operating income of KRW 582.1 billion and net income of KRW 364 billion.
Backed by growth in total subscriber numbers including flat rate calling plan subscribers, the revenue grew 0.7% year-on-year (YoY) and 2.3% quarter-on-quarter (QoQ) despite the implementation of customer tariff cut measures such as per-second billing, activation fee reduction and special discount programs. Operating income climbed 5.2% YoY and 21.1% QoQ helped by a drop in marketing expenses and leased line costs.
As of late June 2010, the cumulative number of subscribers increased by approximately 5.5% YoY, from 23.83 million to 25.14 million. Meanwhile, marketing expenses stood at KRW 887.1 billion, down 6.5% YoY from KRW 948.6 billion, but up 4.9% QoQ from KRW 845.8 billion.
However, based on the marketing cost calculation method put forth by the government, marketing costs marked KRW 772.1 billion, dropping 12.9% YoY and 3.8% QoQ. In particular, monthly marketing costs fell below 22% of monthly revenues in June as a result of the market stabilization efforts made by the company since the government announced the marketing cost guidelines in May*.
* The KCC's marketing cost guidelines encourage mobile operators to spend no more than 22% of mobile revenues on mobile marketing
The wireless Internet revenue expanded by 6.4% YoY and 7.1% QoQ to record KRW 712.9 billion and the number of flat-rate data plan subscribers reached 4.01 million as of late June 2010, marking 26% growth YoY and 15.4% QoQ due to increase in smartphone subscribers. Moreover, SK Telecom's T Store, an open marketplace for applications, secured 1.93 million members and saw 18.65 million downloads as of July 2010, the figures of which increased by 35% and 56%, respectively, compared to the end of June. Particularly, since the debut of Galaxy S smartphone, T Store added an average of 19,000 members per day, representing a whopping 228% growth and its number of downloads also soared by 248% to stand at 247,000. Wireless Internet revenue is expected to grow further given that sales of Galaxy S smartphone surpassed the 500,000 unit mark in just 33 days of release in June and that the number of smartphone subscribers has exceeded 1.7 million as of July and is expected to reach 3 million by the end of the year.
The 2Q Average Revenue Per User (ARPU) of smartphone subscribers - including voice call charges and data communication fees while excluding subscription and connection fees - recorded KRW 55,000, which is KRW 20,000 higher than that of feature phone subscribers. Data ARPU of smartphone users, in particular, turned out to be more than three times higher than that of feature phone users, while data ARPU of smart phone users and feature phone users combined also climbed 5.1% QoQ, which leads to the expectation that ARPU growth will accelerate in the second half of 2010 with greater adoption of smartphones.
Meanwhile, B2B revenue in 2Q marked KRW 190.7 billion. B2B revenue in the first half of 2010, including KRW 165.8 billion recorded in 1Q, amounted to KRW 356.5 billion, representing a 56% rise compared to the first half of 2009. SK Telecom is currently conducting a total of 31 Industry Productivity Enhancement (IPE) projects including 10 in the overseas market. The company projects to achieve its 2010 B2B revenue target of KRW 1 trillion as IPE projects are expected to start producing tangible results in 3Q, thereby generating higher revenues.
SK Telecom's CFO Jang Dong-Hyun said, "SK Telecom will further solidify its leadership in the wireless Internet market, create a virtuous ecosystem in the Korean telecommunications industry and contribute to revitalization of the overall ICT industry through a variety of innovative measures like the introduction of unlimited data service in August and expanding its smartphone lineup. We expect to achieve our 2010 revenue target of KRW 13 trillion by offering services that provide greater customer benefits and convenience, which will in turn attract more customers and boost wireless Internet revenue."
