October 28, 2003
3rd Quarter Earnings for the
Period Ended September 30, 2003
Seoul, Korea, October 28, 2003 - SK Telecom Co., Ltd. (KSE: 017670, NYSE: SKM)
("SKT" or "the Company"), the leading wireless telecommunications company in
Korea, today announced the results of its operations for the third quarter
ended September 30, 2003.
This material contains forward-looking statements with respect to the financial
condition, results of operations and business of SK Telecom and plans and
objectives of the management of SK Telecom. Statements that are not historical
facts, including statements about SK Telecom's beliefs and expectations, are
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results or performance of SK Telecom to be materially different from any future
results or performance expressed or implied by such forward-looking statements.
SK Telecom does not make any representation or warranty, expressed or implied,
as to the accuracy or completeness of the information contained in this
management presentation, and nothing contained herein is, or shall be relied
upon as, a promise or representation, whether as to the past or the future.
Such forward-looking statements were based on current plans, estimates and
projections of SK Telecom and the political and economic environment in which
SK Telecom will operate in the future, and therefore you should not place undue
reliance on them. Forward-looking statements speak only as of the date they
are made, and SK Telecom understates no obligation to update publicly any of
them in light of new information or future events. Additional information
concerning these and other risk factors are contained in SK Telecom's latest
annual report on Form 20-F and in SK Telecom's other filings with The U.S.
Securities and Exchange Commission (SEC).
Contents
Financial Highlights *******...******..********.. 3
Financial Results .***************.********* 4
Income Statement
Capital Expenditure
Balance Sheet
Operating Result *.*******************..**** 8
Appendix (Financial Statements) ..*******..*******...**. 9
IR Contacts *********..*********..*****.*..* 11
I. Financial Highlights
Summary of Income Statement
(KRW bn) Q3 03 Q2 03 Change(%) Q3 02 Change(%)
Revenue 2,410 2,387 1% 2,224 8%
Operating Expenses 1,590 1,570 1% 1,501 6%
Operating Income 820 817 0% 722 14%
Operating Margin 34% 34% * 32% *
Non-operating Income 55 105 -48% 73 -25%
Non-operating Expenses 150 143 5% 156 -4%
Ordinary Income 725 779 -7% 639 13%
Net Income 510 551 -7% 444 15%
Net Margin 21% 23% * 20% *
EBITDA 1) 1,218 1,194 2% 1,110 10%
EBITDA Margin 51% 50% * 50% *
1) EBITDA = Operating income + Depreciation + R&D related depreciation included
in R&D expense
Other Main Items
(KRW bn) Q3 03 Q2 03 Change(%) Q3 02 Change(%)
Wireless Internet Sales 338 306 11% 193 75%
% of Cellular Revenue 16% 14% * 10% *
Marketing Expenses 379 391 -3% 388 -2%
Marketing Commissions 307 300 2% 281 9%
Advertising 72 91 -22% 107 -33%
% of Revenue 16% 16% * 17% *
Capital Expenditure 395 330 20% 556 -29%
% of Revenue 16% 14% * 25% *
Interest-bearing Debt 5,252 4,893 7% 4,663 13%
Debt/Equity ratio (%) 95% 89% * 73% *
II. Financial Results
1. Income Statement
A. Revenue
(KRW bn) Q3 03 Q2 03 Change(%) Q3 02 Change(%)
Sign-up Fees 43 44 -3% 63 -31%
Monthly Fees 731 722 1% 729 0%
Voice Revenue 1,044 1,054 -1% 959 9%
CallCharges 921 938 -2% 873 5%
VAS and Others 123 115 7% 86 44%
Wireless Internet Sales 338 306 11% 193 75%
% of Cellular Revenue 16% 14% * 10% *
Total Cellular Revenue 2,156 2,126 1% 1,944 11%
Interconnection Revenue 254 261 -3% 280 -9%
L-M 152 154 -1% 177 -14%
M-M 102 107 -5% 103 -1%
Total Revenue 2,410 2,387 1% 2,224 8%
1) Voice Revenue
Call charges decreased slightly due to more holidays in this quarter (Korea
Thanksgiving day and summer vacation period) compare to the previous quarter
but it had increased by 5% compare to the same period of last year despite the
tariff cut at the beginning of this year.
VAS and Others sales increased 7% QoQ due to the increase in the usage of
value-added services such as Color Ring.
The sales from "Free Tariff Scheme" increased by 25% QoQ to KRW 39bn.
2) Wireless Internet Sales
Due to the increase in the number of Internet-enabled and high-end handsets
which generate higher wireless Internet ARPU (June, EV-DO, Color, 1X handsets),
wireless Internet sales increased 11% QoQ.
Wireless Internet sales portion in total cellular revenue increased steadily to
16% from 14% in the previous quarter.
B. Operating Expenses
(KRW bn) Q3 03 Q2 03 Change(%) Q3 02 Change(%)
Wage and Employee Benefits 95 69 38% 81 17%
Commissions 578 560 3% 498 16%
Marketing Commissions 307 300 2% 281 9%
Initial Commissions 64 81 -20% 74 -14%
Monthly Commissions 106 102 4% 103 2%
Retention Commissions 137 117 17% 103 33%
Fees 193 197 -2% 168 15%
Other Commissions 78 63 24% 49 60%
Advertising 72 91 -22% 107 -33%
Depreciation 365 347 5% 365 0%
Network Interconnection 190 236 -20% 198 -4%
M-M 131 136 -4% 124 6%
M-L 59 100 -41% 74 -20%
Leased Line 76 76 -1% 60 27%
Others 1) 215 191 13% 193 11%
Total 1,590 1,570 1% 1,501 6%
1) For details, please refer to income statements in appendix
1) Wage and Employee Benefits
Wage & Employee benefits increased due to incentive bonus payment to employees
in this quarter.
2) Commissions
Marketing Commissions: The 2% QoQ increase was due mainly to the increase in
retention commissions which include commission for handset change and some
promotional event cost to lock in quality subscribers.
Other Commission: The increase was mainly due to the increase in the payment of
Information Usage Fee to Content Provider as the wireless Internet revenue
increased.
3) Depreciation
The 5% QoQ increase was due to the increase in depreciating assets.
4) Network Interconnection
M-M: The 4% QoQ decrease was due to the decrease in MOU from the previous
quarter.
M-L: The 41% QoQ decrease was due to the fact that the M-L expense in the 2nd
quarter included the share of KT114 directory service expenses (KRW 40.6 bn for
the loss from 1998~2001).
C. Non-operating Items
(KRW bn) Q3 03 Q2 03 Change(%) Q3 02 Change(%)
Non-operating Income 55 105 -48% 73 -25%
Interest Income 15 20 -26% 11 40%
Incoming Fees 29 36 -20% 31 -8%
Others1) 11 49 -77% 31 -64%
Non-operating Expenses 150 143 5% 156 -4%
Interest Expenses 97 101 -4% 78 24%
Donations 20 21 -2% 22 -10%
Loss on Equity Method 2 5 - 0 -
Others 1) 31 17 90% 55 -43%
1) For details, please refer to income statements in appendix.
1) Interest Income
The QoQ decrease was due to the decrease in quarterly average balance of cash &
marketable securities.
2) Other Non-operation Income
The QoQ decrease was mainly due to the fact that there was dividend income(KRW
25.6bn) from KT shares in the previous quarter.
3) Interest Expenses
The QoQ decrease was due to the decrease in quarterly average balance of
interest-bearing debt.
4) Others in Non-operating Expenses
The QoQ increase was due to the increase in Loss on Disposal of Property and
Equipment from the sale of SK Bigs, the pro basketball team, in the 3rd
quarter.
2. Capital Expenditure
(KRW bn) Q3 03 Q2 03 Change(%) Q3 02 Change(%)
Network 319 245 30% 460 -31%
95 A/B 15 19 -24% 66 -78%
CDMA 2000 1x 150 145 3% 290 -48%
1x 147 138 6% 285 -48%
EV-DO 3 7 -59% 5 -39%
WCDMA 89 0 * 0 *
Backbone and Others 66 81 -19% 105 -37%
Non-network 76 84 -10% 96 -21%
Wireless Internet 39 32 23% 79 -51%
General Supporting 22 40 -45% 17 32%
Others 15 12 19% 0 -
Total CapEx 395 330 20% 556 -29%
3. Balance Sheet
(KRW bn) Sept03 Jun 03 Change(%)
Total Assets 13,463 12,993 4%
Current Assets 3,698 3,730 -1%
Cash and Marketable Securities 1,176 1,186 -1%
Investment Assets 1,910 1,397 37%
Property and Equipment 4,288 4,273 0%
Intangible Assets 3,566 3,592 -1%
Liabilities 7,933 7,476 6%
Current Liabilities 4,578 3,885 18%
Short-term Borrowings 1,459 839 74%
Current Portion of Long-term Debt 1,288 1,300 -1%
Long-term Liabilities 3,355 3,591 -7%
Long-term Debt 2,505 2,754 -9%
Shareholders' Equity 5,530 5,516 0%
Debt/Equity ratio1) 95% 89% *
1) Debt/Equity Ratio = Interest-bearing Debt / Shareholders' Equity
* Interest-bearing Debt = Short-term borrowings + Current portion of
long-term debt + Long-term borrowings and corporate bonds.
1) Cash and Marketable Securities
As of September 30, 2003, Cash and Marketable Securities was KRW 1,176 bn which
include the remaining balance in the trust fund (KRW 346.6 bn) and Hanaro
Telecom CP(KRW 120 bn) bought during the quarter .
2) Investment Assets
The increase in investment securities was due mainly to the purchase of POSCO
shares.
3) Current Liabilities
The increase was due to the funding needs from the stock buyback and the
purchase of Hanaro Telecom CP.
5) Debt/Equity Ratio
As of September 30, 2003, D/E ratio rose to 95% from 89% in the previous
quarter due to increase in short-term borrowings during the quarter.
Operating Result
Q3 03 Q2 03 Change Q3 02 Change
(%) (%)
Subscribers ('000) 18,019 17,857 1% 16,997 6%
Net Adds 162 229 -30% 534 -70%
Activations 898 910 -1% 1,294 -31%
Deactivations 736 681 8% 761 -3%
Monthly Churn Rate(%) 1.4% 1.3% 1.5%
Average Subscribers ('000) 17,932 17,743 1% 16,712 7%
Monthly ARPU(KRW) 44,804 44,841 0% 44,351 1%
Sign-up Fee 799 829 -4% 1,250 -36%
Monthly Fee & Call Charge 30,705 31,199 -2% 31,968 -4%
VAS & Other 2,291 2,169 6% 1,707 34%
Wireless Internet 6,288 5,743 9% 3,847 63%
Interconnection 4,721 4,902 -4% 5,578 -15%
MOU (Minutes)
Outgoing 196 1) 201 -2% 192 2%
Incoming 117 1) 116 1% 114 3%
Subscriber by Handset Feature ('000)
1x(incl. EV-DO) 13,476 12,375 9% 8,517 58%
EV-DO(incl. June) 2,528 1,433 76% NA NA
June 1,243 829 50% NA NA
Color 9,218 7,695 20% 3,417 170%
Wireless InternetARPU by Handset (KRW)
2)
2G 1,301 1,351 -4% 1,375 -5%
1x (Including EV-DO) 7,289 6,978 4% 5,780 26%
Color 9,653 9,726 -1% 9,390 3%
1) August and September MOU are estimates.
2) Excludes others in wireless Internet sales such as financial enabler,
Solution/Platform sales, etc.
IV. Appendix - Income Statement
(KRW mn) Q3 03 Q2 03 Q3 02
Revenue 2,410,249 2,386,852 2,223,641
Operating
Expenses 1,590,123 1,570,014 1,501,427
Wage and
Employee
Benefits 95,038 68,984 81,086
Commissions 578,433 560,116 497,518
Advertising 71,652 91,280 107,014
Depreciation 364,748 346,723 365,324
Network
Interconnection 189,682 235,946 197,835
Leased Line 75,983 76,383 59,686
R&D Expenses 53,138 47,050 45,457
Rent 36,152 34,227 33,456
Frequency
Usage Fees 33,136 32,674 29,943
Bad Debt 5,426 2,093 32,709
Others 86,734 74,537 51,398
Operating
Income 820,126 816,838 722,215
Non-operating
Income 54,663 105,049 72,590
Interest
Income 14,859 20,042 10,599
Incoming
Fees 28,683 35,798 31,198
Gain on
Disposal of
Property and
Equipment 728 440 492
Gain on Equity
Method 0 0 10,655
Foreign
Exchange and
Translation
Gains 9,277 11,090 1,768
Other 1,116 37,678 17,878
Non-operating
Expenses 150,184 142,516 155,852
Interest
Expenses 96,859 100,648 78,054
Donations 20,071 20,562 22,398
Loss on
Disposal of P
roperty and E
quipment 7,883 739 36,269
Loss on Equity
Method 1,881 4,777 -
Foreign
Exchange and
Translation
Loss 1,885 224 6,864
Loss on
Impairment of
Investment
Securities - 2,300 400
Loss on
Disposal of
Investment
Assets - 102 155
Other 21,606 13,164 11,712
Ordinary Income 724,605 779,371 638,953
Income before
Income Taxes 724,605 779,371 638,953
Income Taxes 214,333 228,798 194,935
Net Income 510,272 550,573 444,017
IV. Appendix - Balance Sheet
(KRW mn) Sept03 Jun03
Total Assets 13,462,839 12,992,667
Current Assets 3,698,425 3,730,287
Cash and Marketable Securities 1,175,663 1,186,456
Accounts Receivable - Trade 1,390,129 1,351,740
Short-term Loans 27,813 25,720
Accounts Receivable - Other 913,105 1,006,839
Inventories 6,062 6,668
Other 185,654 152,865
Investment Assets 1,909,838 1,396,980
Long-term Investment
Securities 1,524,573 1,053,172
Long-term Loans 44,554 51,381
Guarantee Deposits 239,707 238,132
Other 101,003 54,295
Property and Equipment 4,288,124 4,272,990
Land 441,744 440,187
Building and Fixture 790,199 797,014
Equipment 2,295,792 2,437,817
Construction in Progress 318,408 265,465
Other 441,981 332,507
Intangible Assets 3,566,451 3,592,410
* *
Liabilities 7,933,160 7,476,260
Current Liabilities 4,577,949 3,885,024
Accounts Payable 713,179 664,114
Short-term Borrowings 1,458,669 838,669
Income taxes Payable 386,013 405,115
Accrued Expenses 473,269 431,718
Current Portion of Long-term
Debt 1,287,749 1,299,690
Other 259,070 245,718
Long-term Liabilities 3,355,210 3,591,237
Long-term Debt 2,505,427 2,754,360
Facility Deposits 45,605 43,676
Accrued Severance Indemnities 73,975 67,391
Other 730,203 725,809
Shareholders' Equity 5,529,679 5,516,407
Capital Stock 44,639 44,639
Capital Surplus 2,916,150 2,916,150
Retained Earnings 4,706,334 4,734,158
Capital Adjustments -2,137,445 -2,178,540
Treasury Stock -2,047,103 -2,067,784
Unrealized Loss on Valuation of
Long-term Investment Securities -93,792 -113,916
Stock Options 3,450 3,160
V. IR Contacts
IR Office Title Telephone Email
Tae-Jin Park Head of IR Team + 82-2) 2121-4212 tjpark@sktelecom.com
Jung-Whan Choi Senior Manager + 82-2) 2121-4213 choi72@sktelecom.com
Uk Jang Manager + 82-2) 2121-4215 ujang@sktelecom.com
Min-Young Kim Assistant Manager + 82-2) 2121-4217 minykim@sktelecom.com
JS Oh Assistant Manager + 82-2) 2121-4210 jsoh@sktelecom.com
Hannah Kim Assistant Manager + 82-2) 2121-4542 hannah@sktelecom.com
Thank you.
END