Ace South Korean telecom firm
SK Telecom Corp.
) reported second quarter 2013 results. Quarterly consolidated
net income shot up to KRW 468.0 billion (approximately $421.2
million) from KRW 120.6 billion (approximately $108.5 million) in
the year ago quarter aided by strong contributions from SK Hynix.
Consolidated operating revenue grew 3.9% to KRW 4,164.2 billion
($3.7 billion) in the second quarter driven by higher numbers of
LTE subscribers and growth in new business that includes B2B
Mobile service revenues increased 4.5% year over year to KRW
2,787.0 billion (approximately $2.5 billion). Interconnection
revenues declined 17.9% to KRW 217.0 billion (approximately $195
million), while new business and other revenues were up 48.1%
year over year at KRW 205.0 billion (approximately $157.5
Operating Income & Expenses
Consolidated operating income grew 33.2% to KRW 553.4 billion
(approximately $498.1 million) in the second quarter as a result
of lower marketing expenses. Operating margin was 13.3%, up 290
Operating expenses crept up 0.5% year over year to KRW 3,610.8
billion (approximately $3.2 billion). Marketing expenses
decreased 11.2% year over year to KRW 853 billion ($767.7
million) as the company is focused on promoting its services
through advertising rather than subsidy-based marketing
Subscriber, ARPU & Churn
During the quarter, subscribers increased 1.8% year over year to
27.1 million with net addition of 110,000 customers.
Average revenue per user (ARPU) went up 4.9% year over year to
KRW 41,892 (approximately $37.7) on increased LTE subscribers.
Churn rate decreased to 2.3% from 2.4% a year ago as the company
is seeking customer retention through its marketing initiatives.
As of Jun 30, 2013, SK Telecom had KRW 1,693.0 billion
(approximately $1.5 billion) of cash and marketable securities on
its balance sheet compared with KRW 1,698.6 billion
(approximately $1.5 billion) in the comparable quarter last year.
Debt-to-equity ratio was 51.5% compared with 61.5% in the
prior-year quarter. Capital expenditure decreased to KRW 293.0
billion (approximately $263.7 million) from KRW 616.0 billion
(approximately $554.4 million) in second quarter 2012.
Looking further into 2013, SK Telecom's focus on developing
LTE-Advanced technologies as well as deploying 5G Wi-Fi hotspot
routers is encouraging. Further, the introduction of new
services, investment in high-speed Wi-Fi and data femtocell,
foray into mobile software businesses and various collaborations
are expected to boost the company's long-term results.
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.
SK Telecom currently retains a Zacks Rank #3 (Hold).
Stocks worth considering in this sector are
NTT DOCOMO, Inc.
Turkcell Iletisim Hizmetleri AS
Fairpoint Communications, Inc.
). While NTT DOCOMO has a Zacks Rank #1 (Strong Buy), Turkcell
and Fairpoint retain a Zacks Ranks #2 (Buy).
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