SK Telecom Earnings: Management Focuses on AI; Fair Value up to USD 30 on Currency and Cost Controls

SK Telecom’s third-quarter result showed solid growth for its core mobile and fixed broadband businesses with management continuing to aggressively pursue growth projects in the artificial intelligence field. Some risks for mobile pricing have emerged with the government encouraging Korean operators to allow customers to sign up for long-term evolution plans with 5G phones and SKT indicating that it was likely to do so in November. This could allow lower-value customers to cycle down plans, but we believe management should be able to massage plan pricing to limit the impact. Third-quarter revenue grew 1.4% year on year with high fixed-cost leverage leading to operating profit growth of 7.0% year on year despite inflation. Growth was helped by data center revenue growth of 33% and cloud revenue growth of 39%.