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(2nd LD) SK Telecom's profit plunges in 2019 on equity losses, costs

All News 11:42 February 07, 2020

(ATTN: ADDS photo, more info in paras 5, 7, 10-14)

SEOUL, Feb. 7 (Yonhap) -- SK Telecom Co., South Korea's top mobile phone operator, said Friday its net income plunged 72.5 percent last year from a year earlier due to reduced equity gains from its chip-making affiliate.

In a regulatory filing, SK Telecom reported a net income of 861.9 billion won (US$725.9 million) last year, down from 3.1 trillion won in 2018, on a consolidated basis.

The company said that operating profit for the year fell 7.6 percent on-year to 1.11 trillion won, although its annual revenue increased 5.2 percent on-year to a record 17.74 trillion won.

This photo taken by SK Telecom Co. on Sept. 9, 2019, shows the company's engineers checking a mobile network in Seoul. (PHOTO NOT FOR SALE) (Yonhap)

SK Telecom attributed its profit decline to equity ties with chipmaking affiliate SK hynix Inc.

SK Telecom holds a 20 percent stake in SK hynix, which reported poor 2019 earnings due to a slump in the memory chip industry. SK Telecom gained 416.2 billion won from its equity ties with SK hynix in 2019, a sharp drop from 3.2 trillion won in 2018.

Its increased spending on 5G service marketing and infrastructure buildup also dragged down the bottom line, according to SKT. The company began its commercial 5G service in April.

SK Telecom said its marketing costs increased 5.5 percent on-year to 3 trillion won in 2019, while its capital expenditure jumped 37 percent on-year to 2.92 trillion won due to its expanded 5G coverage.

In the fourth quarter, SK Telecom posted a net loss of 45.2 billion won, turning from a profit of 474.5 billion won a year earlier.

Its operating profit declined 27.8 percent on-year to 162.5 billion won in the October-December period, but revenue rose 1.4 percent on-year to 4.41 trillion won over the cited period.

This photo taken by SK Telecom Co. on April 5, 2019, shows the company's employees promoting its 5G services at its retail store in Seoul. (PHOTO NOT FOR SALE) (Yonhap)

For the whole of 2019, SK Telecom's revenue from the mobile business dropped 2.5 percent on-year to 11 trillion won. The company said it attracted 2.08 million 5G subscribers in 2019, but the number of subscribers to its 5G service is expected to reach at least 6 million this year.

Revenue from the IPTV business, managed by its subsidiary SK Broadband Inc., rose 10.7 percent on-year to 1.2 trillion won. The company said its IPTV service subscribers numbered 5.19 million last year, up 464,000 from a year earlier.

The company said sales from its non-mobile businesses, such as media, security and commerce, surged 21.6 percent on-year to surpass 5 trillion won in 2019.

For this year, SK Telecom said it expects sales of 19.2 trillion won. The company added it plans to beef up its 5G-related services in 2020, while expanding its presence in the pay TV industry.

Last month, South Korea's ICT ministry approved the merger between SK Broadband and the country's No. 2 cable TV operator, t-broad Co. The merged entity is scheduled to be launched in April, with 8 million pay TV subscribers already in its hands.
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