Leading South Korean wireless communication service provider, SK Telecom Co. Limited (SKM) reported fourth quarter and full year 2013 results. Quarterly consolidated net income plunged 43.4% year over year to KRW 293.7 billion (approximately $264.3 million).
However, for the full year, SK Telecom posted net income of KRW 1,609.5 billion ($1.44 billion), up 44.3% year over year. Increased equity income from SK Hynix aided the full-year growth.
Consolidated operating revenue grew 3.3% to KRW 4,294.8 billion ($3.86 billion) in the fourth quarter. In 2013, revenues increased 2.9% year over year to KRW 16,602.1 billion ($14.9 billion) driven by a growing Long Term Evolution (LTE) subscriber base and new businesses including B2B solutions.
Segment Revenues
Mobile service revenues increased 1.7% year over year to KRW 2,828.0 billion (approximately $2.5 billion). Interconnection revenues improved 44.6% to KRW 240.0 billion ($216.0 million), while new business and other revenues were up 17.5% at KRW 248.0 billion ($223.2 million) from the year-ago quarter.
Operating Income & Expenses
Operating income deteriorated 5.4% year over year to KRW 509.7 billion (approximately $458.8 million) in the fourth quarter, resulting in operating margin of 11.9%.
Operating expenses rose 4.7% year over year to KRW 3,785.1 billion (approximately $3.4 billion). Marketing expenses increased 11.7% year over year to KRW 842.0 billion ($757.8 million).
Subscriber, ARPU & Churn
During 2013, subscribers grew 1.4% year over year to 27.35 million with a net addition of 391 customers. The number of LTE subscribers reached 13.5 million at the end of 4Q13.
Average revenue per user (ARPU) improved 5.6% year over year to KRW 42,377 (approximately $38.13) in 2013, while the churn rate decreased to 2.3% from 2.6% a year ago.
Liquidity
SK Telecom exited 2013 with KRW 1,765.1 billion (approximately $1.6 billion) of cash and marketable securities on its balance sheet compared with KRW 1,445.1 billion (approximately $1.3 billion) in 2012. Capital expenditure decreased to KRW 2,316 billion (approximately $2.1 billion) from KRW 2,858 billion (approximately $2.6 billion) in the prior year.
Other Stocks
Among other foreign telecom firms, Telus Corporation (TU) is expected release its fourth quarter results on Feb 13, while Rogers Communications Inc. (RCI) will release the same on Feb 12.
Our Analysis
We remain optimistic about SK Telecom’s focus on developing LTE-Advanced technologies as well as deploying 5G Wi-Fi hotspot routers. Further, introduction of 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 in 2014. SK Telecom currently carries a Zacks Rank #1 (Strong Buy). Another stock worth considering is China Unicom Hong Kong Limited (CHU) which has the same Zacks Rank.
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