Ace South Korean telecom firm
SK Telecom Corp.
) reported first quarter 2013 results. Quarterly consolidated net
income shot up 15.3% year over year to KRW 346.0 billion
(approximately $311.4 million), aided by strong contributions
from SK Hynix.
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Consolidated operating revenue grew 3.6% to KRW 4,113.0 billion
($3.7 billion) in the first quarter, driven by positive effects
of the merger of SK M&C and SK Planet, expansion of new
businesses and a growing Long Term Evolution (LTE) subscriber
Mobile service revenues increased 4.0% year over year to KRW
2,727.0 billion (approximately $2.5 billion). Interconnection
revenues declined 17.3% to KRW 210.0 billion ($189.0 million),
while new business and other revenues were up 32.6% at KRW 175.0
billion ($157.5 million) from the year-ago quarter.
Operating Income & Expenses
Consolidated operating income declined 17.6% to KRW 411.0 billion
(approximately $369.9 million) in the first quarter, resulting in
operating margin of 10.0%. The decline was mainly due to higher
marketing expenses coupled with steeper depreciation costs.
Operating expenses rose 6.7% year over year to KRW 3,702.0
billion (approximately $3.3 billion). Marketing expenses
increased 25.1% year over year to KRW 907.0 billion ($816.3
Subscriber, ARPU & Churn
During the quarter, subscribers increased 1.6% year over year to
26.97 million with a net addition of 68,000 customers.
Average revenue per user (ARPU) went up 3.4% year over year to
KRW 40,450 (approximately $36.4), while the churn rate decreased
to 2.4% from 2.5% in a year-ago period.
As of Mar 31, 2013, SK Telecom had KRW 1,493.0 billion
(approximately $1.3 billion) of cash and marketable securities on
its balance sheet compared with KRW 2,457.0 billion
(approximately $2.2 billion) in the comparable quarter last year.
Debt-to-equity ratio was 53.9% compared with 63.9% in the
prior-year quarter. Capital expenditure decreased to KRW 351.0
billion (approximately $315.9 million) from KRW 482.0 billion
(approximately $433.8 million) in first quarter 2012.
Foreign stocks worth considering are
China Mobile Limited
Mobile Telesystems OJSC
Research In Motion Limited
). All the three carry Zacks Rank #2 (Buy).
Looking further into 2013, SK Telecom's focus on development of
the advanced LTE-Advanced technologies as well as deployment of
5G Wi-Fi hotspot routers is encouraging. Further, the
introduction of new services, investment in high-speed Wi-Fi and
data femtocell, forays into mobile software businesses and
various collaborations are expected to boost the company's
However, the company's investment in advanced wireless networks
along with mobile tariff cuts will likely hamper profitability in
the coming quarters. Additionally, stiff competition and
regulatory issues will continue to act as headwinds for the
company. SK Telecom currently retains a Zacks Rank #3 (Hold).