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Transcript Summary

SK Telecom reported strong Q1 2026 results, signaling a recovery from past cybersecurity challenges. Consolidated revenue reached KRW 4.39 trillion, and operating income surpassed KRW 500 billion, returning to pre-incident levels. The company resumed quarterly dividends at KRW 830 per share, reflecting management's confidence in restored profitability. The MNO segment added 210,000 net handset subscribers, driven by customer value initiatives and new flagship launches, while avoiding destructive price wars. A key highlight was the AI Data Center business, which saw 89% year-over-year revenue growth. SK Telecom is expanding its AI infrastructure through new facilities in Ulsan and Seoul and is pursuing a 'full-stack' AI strategy across B2B and B2C segments. Technical discussions focused on AI-RAN developments in partnership with NVIDIA and Samsung, aiming to utilize wireless networks for AI inference and improved efficiency. Management remains focused on transitioning into a global AI company while maintaining telecom stability. Although specific AI margins were withheld, the overall outlook was bullish, supported by a mix of subscriber recovery, cost efficiencies from AX transformation, and high demand for AI infrastructure among global tech players. The company expects full-year earnings to continue their upward trajectory.

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SK TELECOM: Cosmetic Earnings Growth Driven by Massive Commission Capitalization and Hynix Equity Gains

Full Earnings Call Transcript — Q1 • 2026-05-07

Operator: Good morning, and good evening. Thank you all for joining the conference call for the SK Telecom earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions]. Now we will begin the presentation on SK Telecom's First Quarter of Fiscal Year 2026 Earnings results.
Tae Hee Kim: [Interpreted] Good afternoon. I am Tae Hee Kim, IRO of SK Telecom. I'd first like to ask for your kind understanding that the earnings call started later than scheduled. Let us now begin the earnings conference call for the first quarter of 2026. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors such as market and management situations. Let me now present our CFO.
Jong-seok Park: [Interpreted] Good afternoon. This is Jong-seok Park, CFO of SK Telecom. At the beginning of this year, we said that we would focus on strengthening fundamental business competitiveness centered on customer value and restore profitability through sophisticated AI business in 2026. The first quarter was a significant period in which this direction began to translate into actual results. Thanks to [indiscernible] efforts to regain our customers' trust, the company recorded a net subscriber add this quarter and the fundamentals of our core telecom business are rapidly returning to normal. The performance of the AI business is gradually improving as a result of business restructuring based on a strategy of focus and prioritization. As these changes led to actual results, we were able to post earnings similar to the levels prior to the cybersecurity incident. With business performance returning to normal, the company has decided to resume dividend payments starting this quarter. Dividend per share for the first quarter is KRW 831 (sic) [ 830 ]. We are pleased that we were able to deliver on the promises that we made during the last earnings call. We will make every effort to restore the dividend level by normalizing earnings on a full year basis through continuous improvement of the telecom business fundamentals and creation of additional results from the AI business. Let me now report on the financial results for Q1. Consolidated revenue posted KRW 4.39 trillion, up 1.5% Q-on-Q on the back of MNO revenue growth driven by subscriber growth and the growth trend of the data center business. We posted KRW 537.6 billion in consolidated operating income. Our quarterly operating income exceeded more than KRW 500 billion, which is attributable to extensive efforts to regain customers' trust and company-wide initiatives to improve productivity. Let me now present business highlights by business line. MNO achieved a handset subscriber net add of approximately 210,000 in the first quarter, which is a substantive outcome of diverse measures taken to innovate customer value and restore customers' trust. Yet we are not complacent, but remain committed to further strengthening business fundamentals and competitiveness with customer-friendly products and services. We have expanded customer benefits and usability by restructuring the membership program, and we're currently overhauling price plans to offer more choices to customers. The fixed-line business is also producing stable results, thanks to continued subscriber net adds, an increase in the share of subscribers signing up for higher price plans, including Giga price plan and a stronger subscriber retention trend. We will do our utmost to achieve the dual objectives of subscriber recovery and profitability enhancement through constant change and execution based on the philosophy that customers are the essence of our business. In the AI business, the effects of the strategy of focus and prioritization are gradually becoming visible. AI data center revenue is maintaining a growth trend year-over-year, driven by Pangyo Data Center and higher utilization of Gasan Data Center. The construction of Ulsan AI Data Center is underway, and we plan to pursue additional scale-up by building new data centers in areas, including Seoul. New opportunities are emerging for our AI data center business due to the surge in demand for AI data centers from global tech companies. Based on business experience and differentiated competitiveness across the entire value chain of AI data centers, we will actively pursue partnerships with global players and keep expanding our AI infrastructure business. Within AI B2C business, the agent business is evolving in a direction that creates synergy with the telecom business and enhances fundamental competitiveness. We plan to improve ADAS performance by linking it with our proprietary AI foundation model to strengthen its own competitiveness. With the increase in AI adoption, the B2B market is undergoing structural change driven by AI transformation and new AI-based markets are taking shape. SK Telecom will secure leadership in the rapidly evolving market by utilizing full stack AI capabilities across infrastructure, models and agents and mobilizing the customer base and execution capabilities secured from our B2B business. We ask for the continued support and interest of our investors and analysts as we overcome the crisis and continue driving change and embracing challenges to achieve greater growth. Thank you.
Operator: [Interpreted] [Operator Instructions] The first question will be provided by Seung Woong Lee from Yuanta Securities.
Seung Woong Lee: [Interpreted] I'm Seung Woong Lee from Yuanta Securities. I have 2 questions. First of all, as you mentioned during your earnings presentation, the company started quarterly dividend payment starting from Q1. And I'd like to understand the overall shareholder return plan and the size of the shareholder return for the entire year of 2026. Secondly, I can see that the company was able to produce earnings results that are similar to the levels prior to the cybersecurity incident. Is it safe to understand that this type of trend will become a new normal? And I'd like to get some guidance from the company on the full year basis earnings outlook.
Jong-seok Park: [Interpreted] First of all, thank you for your questions. I'd like to comment on the question on our annual earnings outlook, and then I'll move on to addressing your second question on shareholder returns. First, on our annual earnings outlook. In the first quarter, our operating profit posted KRW 537.6 billion, and the trend has reversed from the downward trend after the cybersecurity incident and shown an upward trend to be approaching the pre-incident levels. Our goal is to improve the full year earnings further from the current levels. For our telecom business, thanks to our efforts to restore customers' trust, which is our #1 priority in 2026, we achieved a net addition to handset subscribers in Q1, contributing to the recovery of the bottom line as well as the top line. For our AI business, we are reviewing and implementing various measures to improve the structural profitability by pursuing pivoting and discontinuation of low-margin businesses through the strategy of focus and prioritization. In addition, data center business is seeing a meaningful growth trend and the B2B business has revised its strategy to focus on AI full-spec capabilities. And we believe that these businesses will drive revenue and contribute to bottom line improvements for the remainder of the year. And finally, we are working to improve productivity in terms of business operations and processes through enterprise-wide AI tool adoption and AX transformation of call centers, and these measures are having a positive impact on cost efficiency improvement. So in short, we will do our utmost to recover the annual [indiscernible] to be higher than the pre-incident levels through profitability recovery of the telecom business, expansion of growth businesses centered on AI data centers and continuous productivity enhancement. Now I'd like to speak about shareholder returns for 2026. As was announced earlier, we resumed quarterly dividend payments with the DPS for the first quarter of KRW 831 (sic) [ 830 ]. I'd like to thank our shareholders very much for their kind understanding and patience. As earnings continue to recover this year, we plan to conduct dividend payments as stably as possible. As for the size of the dividends for the whole year, when concrete full year earnings become more materialized, the Board of Directors will have discussions and make decisions in consideration of business performance and financial structure. I won't be able to share with you any specific number at this point, but I promise that we will do our utmost to restore the dividend levels to the previous levels. At the Annual General Meeting of Shareholders in March, the company transferred capital reserves of KRW 1.7 trillion to retained earnings to allow tax-exempt dividends, which is expected to deliver substantive benefits to shareholders. And for your reference, according to relevant law, tax-exempt dividends are possible from the 2026 year-end dividends.
Operator: [Interpreted] The following question will be presented by Joonsop Kim from KB Securities.
Joonsop Kim: [Interpreted] I'm Joonsop Kim from KB Securities. I have 2 questions, one on MNO marketing, the other on AI DC. You have produced a recovery trend in terms of the net subscriber adds as well as market share. So I'd like to understand the overall subscriber market share target for SK Telecom and the marketing direction and how you're planning to strike a balance between profitability and marketing. Secondly, you reported that the AI DC revenue in the first quarter has increased by 89% year-over-year. And I'd like to understand how this AI DC business is making meaningful contribution to your profitability. If you can give us some color, I would appreciate it.
Jong-seok Park: [Interpreted] Thank you for your questions. I'd like to address your question on our AI DC business, and I will hand over to [indiscernible] in charge of MNO support, who will answer your question on our MNO subscriber targets. First, let me comment on the time line as to when AI DC business will be able to make meaningful earnings contribution. First of all, I'd like to remind you that we only announced the AI DC revenue numbers, and we do not disclose any other indicators, including profitability-related indicators. We're aware that the market is interested in knowing this, but please understand that we are doing so in consideration of various factors, including the domestic data center market situations. Nevertheless, what I can say is that the AI DC business is comparable to the existing telecom business in terms of profitability, and there's much room for the AI DC business to become even more profitable going forward. Since AI DC is our key growth business, we will think of what we can share to help investors better understand our AI DC business performance. Now I'd like to turn to [indiscernible] in charge of MNO support to answer your question on our MNO subscriber targets.
Unknown Executive: [Interpreted] I'd like to comment on our MNO subscriber target. The New Year 2026 started with the number of handset subscribers reduced by around 986,000 year-over-year. Reflecting on our performance in the first quarter, we were able to achieve a net add in subscribers on the back of changes in the competitive landscape, back-to-school marketing to attract new subscribers and S26 flagship handset marketing. As a result, we were able to achieve a net addition to our handset subscribers of 208,000. Throughout the year, we will continue to make efforts to recover subscribers by targeting new segments, including foreigners and strengthening competitiveness in terms of products, services and sales channels. When we continue to strengthen fundamental competitiveness through business operation focused on profitability, we believe that the subscriber base and the market share will naturally grow. And based on this approach, we will avoid engaging in excessive spending competition aimed solely at increasing subscriber numbers, but rather focus on market operation on securing high-LTV subscribers.
Operator: [Interpreted] The following question will be presented by Aram Kim from Shinhan Securities.
ARam Kim: [Interpreted] I'm Aram Kim from Shinhan Securities. I'd like to ask you 2 questions. First of all, telecom's equipment providers, both in Korea as well as abroad are focusing on developing AI-RAN, which is about using telecommunications network infrastructure for AI functions such as inference. So I'd like to get SK Telecom's view on AI-RAN. And secondly, there is an increasing demand and growth for AI traffic. And I'd like to understand what this increase in AI traffic, what kind of business opportunities will this bring to SK Telecom as a telco?
Jong-seok Park: [Interpreted] Thank you for your questions. On your questions on AI-RAN as well as business opportunities brought by AI traffic, [indiscernible] in charge of Network Strategy will address them.
Unknown Executive: [Interpreted] I'm [indiscernible] in charge of Network Strategy. I'd like to first talk about expected benefits and commercialization plans of AI-RAN. AI-RAN is evolving in 2 domains. One is to improve telecommunications network infrastructure using AI and the other is to use wireless network infrastructure as a platform to provide AI services. So in the first domain, we expect to be able to automate base station operations through AI-based failure prediction, optimization of traffic and resources and power efficiency improvement. This will lead to higher efficiency and improved customer experience. As for the second domain, we may be able to create new business opportunities and generate profit from the provision of AI services such as inference and media processing by utilizing AI computing resources at the base stations. We are actively participating in technology research and standardization together with global players and manufacturers such as Samsung, DOCOMO and NVIDIA for the evolution of AI-RAN. However, AI-RAN is still in an early stage, so we will consider the adoption of AI-RAN by comprehensively considering various aspects such as technology maturity, standardization, validation on commercial networks and other aspects. We will continue to maintain technology leadership in the next-generation network technology areas, including AI-RAN and use the technology leadership to proactively secure new business opportunities. Next, I'd like to make some comments on AI traffic. While there is a significant increase in AI traffic, the share of AI traffic in the entire traffic is still not very high. However, we're considering ways to make AI traffic increase with a connection with AI-RAN and how to distribute traffic across the networks. So we will continue to look into technology to be able to do so.
Operator: [Interpreted] There are no questions in the queue right now.
Tae Hee Kim: [Interpreted] This concludes the earnings conference call for 2026 first quarter of SK Telecom. If you need further explanations or have additional questions, please contact IR at any time. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]