AI Business to Show Tangible Results

SK Telecom (SKT) has recently announced that it should reap AI solutions sales of around W60bn this year. While a number of companies worldwide are facing difficulties generating AI-driven sales, SKT should bask in AI-related sales within this year, highlighting its AI business strategy.

SKT has recently invested in SGH and Perplexity, both of which should generate sales in the near future. SGH should book AI data center-related solutions sales, while Perplexity is forecast to gain subscriber number and influence in the domestic market by providing A. and SKT customers with Pro Search for free.

2Q24 Earnings Beat Expectations

SKT recorded 2Q24 sales of W4.42tn (+2.7% y-y, -1.2% q-q) and OP of W537.5bn (+16.0% y-y, +7.8% q-q), with OP beating our estimate of W504.3bn and the market consensus of W518.0bn. While sales at the wireless telecom business (W2.67tn, +2.1% y-y) and wired telecom domain (W1.09tn, +2.3% y-y) grew slowly, OP arrived sound, thanks to: 1) a 3.8% y-y decrease in marketing expense to W690.4bn amid lessened competition; and 2) a 3.4% y-y decline in depreciation expense to W916.9bn, helped by reduced capex. In 2Q24, earnings were also positively impacted by one-off gains from a video codec-related patent contract. In 2H24, competition should continue to weaken, and cost control efforts should remain intact.