SK Telecom relies on subsidiaries for growth

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SK Telecom relies on subsidiaries for growth

Korea’s largest mobile carrier SK Telecom posted moderate second quarter earnings despite a slight drop in its stand-alone operating profits.

According to the company on Thursday, it posted 4.35 trillion won ($39 billion) in consolidated revenue, up 1.8 percent from the previous year, and 423.3 billion won in operating profits, up 3.9 percent year on year.

While operating profit declined by 3.3 percent during the April-June quarter to 462.3 billion won for the mobile carrier alone due to the depreciation of the 2.6 gigahertz frequency band it acquired last year and increased marketing costs, subsidiaries including internet and TV service provider SK Broadband and e-commerce platform operator SK Planet contributed to consolidated operating profit gains, the company said.

SK Broadband showed favorable second quarter earnings based on an increased subscriber base for its ultra-high definition set-top box service. The subsidiary said subscribers to its internet protocol TV service surpassed 1.5 million and paid-content has continued to grow in popularity. The subsidiary’s earnings from its IPTV service jumped 22.8 percent year on year during the second quarter to post 244.6 billion won in revenue.

SK Planet also reported positive earnings, a growth of 5.4 percent year on year, as its online shopping mall 11st cut its operating loss by 35.1 billion won by rationalizing its marketing, the company said. Heated competition in e-commerce sparked a price-war and ate up profits.

The carrier’s stand-alone revenue increased slightly, by 0.6 percent, to 3.1 trillion won year on year driven by more handset subscribers and network data usage growth. According to the telecom company, the earnings from its new business areas centered on Internet of Things services also contributed to expanding revenue.

“Despite unfavorable market conditions for telecom companies, we managed to show an improved earnings report compared to the previous year thanks to our subsidiaries,” said Ryu Young-sang, executive vice president of SK Telecom’s strategy and planning division. “In the longer-term, we will transform into a new information communication and telecommunications company by expanding our businesses in media and IoT.”

SK Telecom set media and IoT as its two future cash cows and said it will continue investing to expand that side of its business. By connecting media and IoT services with the carrier’s existing artificial intelligence platform as well as its telecommunications network and mobile app services like T Map, SK Telecom hopes to offer customized products and services for customers.

Smaller carrier LG U+ posted steep growth of 15.5 percent with operating profits reaching 208 billion won and revenue increasing 4.5 percent year on year to 3.1 trillion won. LG has been expanding its IPTV service. As of the second quarter, subscribers to LG’s set-top box grew 15.9 percent to 3.31 million from the previous quarter. Increased handset subscribers and data spending also boosted company earnings.

LG is also concentrating on its IoT business. It is expecting to secure 1 million subscribers to its IoT service by the end of this year. As of now, it has reached 800,000 subscribers.

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