SK Telecom recovered operating profit in the 500 billion won range in the first quarter of this year, but it declined compared with the same period last year. The company attributed it to subscriber churn and higher marketing burdens following last year's hacking incident, compounded by a base effect from strong first-quarter results a year earlier. While a rebound in wireless subscribers and growth in artificial intelligence (AI) data centers (DC) were confirmed, some said more time is needed for a full normalization of results.
SK Telecom said on May 7 that on a consolidation basis it posted first-quarter revenue of 4.3923 trillion won, operating profit of 537.6 billion won, and net profit of 316.4 billion won. Revenue fell 1.38% on-year, and operating profit decreased 5.25%. Net profit dropped 12.49%. Compared with the previous quarter, revenue rose 1.5%, and operating profit recovered to the 500 billion won range on a quarterly basis for the first time in a year.
Compared with the previous quarter, the recovery was clear, but profitability still deteriorated versus the first quarter last year. SK Telecom recorded first-quarter consolidation revenue of 4.4537 trillion won, operating profit of 567.4 billion won, and net profit of 361.6 billion won last year. This year's first-quarter operating profit decreased by 29.8 billion won from a year earlier. In particular, the base effect from strong first-quarter results last year also weighed on the figures. Because the comparison point was high, this year's results look more downbeat year over year, even though they improved from the prior quarter.
◇ Profitability pressured by hacking fallout; wireless subscribers rebound
The industry sees the fallout from last year's hacking incident as a drag on results. A telecommunications industry official said, "SK Telecom moved to replace SIMs, take customer protection steps, and ramp up marketing to defend subscribers after the hacking incident," adding, "While a large portion of the direct one-off expense was reflected in last year's results, the expense burden to restore the subscriber base and regain customer trust continues into this year."
The wireless business showed signs of recovery. SK Telecom posted a net increase of about 210,000 mobile subscribers in the first quarter. Mobile service revenue rose 1.7% from the previous quarter. The revenue base, which had been shaken by last year's subscriber outflow, was partially restored. The company said membership and plan overhauls and other steps to improve customer value led to subscriber recovery.
However, it is hard to say subscriber recovery immediately translated into improved profitability. The telecommunications industry believes sales incentives and marketing expense burdens likely grew as companies worked to win back churned customers and secure new ones after the hacking incident. Although wireless revenue increased quarter over quarter, analysts say the decline in consolidation operating profit on-year reflects this expense structure.
◇ SK Broadband and AI DC provide defense; seeking a rebound with GPUaaS and B2B AI
SK Broadband, which oversees the fixed-line business, helped defend results. SK Broadband's first-quarter revenue rose 3.2% on-year to 1.1498 trillion won, and operating profit increased 21.4% to 116.6 billion won over the same period. Growth in high-speed internet and cost efficiencies fed through to improved profitability.
The artificial intelligence (AI) business continued to grow. SK Telecom's first-quarter AI data center revenue rose 89.3% on-year to 131.4 billion won. Utilization at AI data centers including Gasan increased, and revenue grew for GPUaaS, which delivers graphics processing unit (GPU) resources in a cloud format.
SK Telecom plans to expand its AI infrastructure business centered on AI data centers. With demand for AI infrastructure rising among global big tech and domestic corporations, the company aims to strengthen a value chain spanning data centers, GPUaaS, networks, and AI services.
It will also ramp up its push into the enterprise AI market. Leveraging its position as a full-stack provider covering AI infrastructure, models, and services, SK Telecom plans to grow its B2B AI business. Recently, it created a CEO-affiliated enterprise integration task force.
In consumer-facing AI, the company will advance its AI agent service "adot." It plans to link its independent AI foundation model project to improve performance and expand integration between telecom services and AI agents.
Park Jong-seok, SK Telecom chief financial officer (CFO), said, "The first quarter was a meaningful period in which we delivered tangible results in line with this year's goal of strengthening fundamental competitiveness around customer value and restoring profitability through a streamlined AI business," adding, "We will continue to focus on restoring results by steadily producing outcomes."