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Edited Transcript of 017670.KS earnings conference call or presentation 27-Jul-18 6:00am GMT

Q2 2018 SK Telecom Co Ltd Earnings Call

Seoul Aug 5, 2018 (Thomson StreetEvents) -- Edited Transcript of SK Telecom Co Ltd earnings conference call or presentation Friday, July 27, 2018 at 6:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Jeong Hwan Choi

SK Telecom Co., Ltd. - Head of IR

* Young Sang Ryu

SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director

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Conference Call Participants

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* Hoi Jae Kim

Daishin Securities Co. Ltd., Research Division - Analyst

* Hongsik Kim

* Jisoo Jeong

Meritz Securities Co., Ltd., Research Division - Analyst

* Jong In Yang

Korea Investment & Securities Co., Ltd., Research Division - Analyst

* Joonsop Kim

KB Securities Co., Ltd., Research Division - Analyst

* Stanley Yang

JP Morgan Chase & Co, Research Division - Analyst

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Presentation

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Operator [1]

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(foreign language) Good afternoon. First of all, thank you all for joining this conference call. And now we will begin the conference call by the Fiscal Year 2018 Second Quarter Earnings Results by SK Telecom. This conference will start with a presentation, followed by a divisional Q&A session. (Operator Instructions)

Now we shall commence the presentation by SK Telecom.

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Jeong Hwan Choi, SK Telecom Co., Ltd. - Head of IR [2]

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(foreign language) Good afternoon. I am Jeong Hwan Choi, the IRO of SK Telecom. Today's conference call will consist of the presentation on the earnings results for Q2 of 2018 and the future management plans and strategic direction by Young Sang Ryu, CFO and Executive Vice President of the Corporate Center, followed by a Q&A session.

(foreign language) Today's conference call will provide consecutive interpretation, and we also have here with us executives from relevant business divisions to help deepen your understanding.

Before we begin, we want to remind you that all forward-looking statements are subject to change depending on the macroeconomic and market situation.

Let me now present our CFO.

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Young Sang Ryu, SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director [3]

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(foreign language) Good afternoon. This is Young Sang Ryu CFO of SK Telecom. Let me first discuss the consolidated earnings highlights of Q2 2018.

(foreign language) Consolidated revenue under IFRS 15 recorded KRW 4,154.3 billion, down 0.7% quarter-on-quarter. Despite the pressure on revenue due to more selective discount plan subscribers and tariff discounts provided to the low-income population, continued growth of our subsidiaries such as SK Broadband offset the revenue decline.

(foreign language) Consolidated operating income under IFRS 15 recorded KRW 346.9 billion, a 6.6% increase quarter-on-quarter. Our efforts to pursue customer value innovation under a stabilizing market trend translated into improved profit. Instead of consumptive marketing, we changed our roaming and mandatory contract systems to be more customer friendly and focused on enhancing actual customer value, such as reorganizing the membership program and providing handset rentals. As a result, we saw a record low churn rate of 1.2%, the lowest since the current market structure among the 3 telcos was set in place. Under market circumstances represented by the record low churn rate, marketing commission was also cut by 6.7% quarter-on-quarter.

(foreign language) Net income in IFRS 15 recorded a record high at KRW 914.3 billion, up 31.9% quarter-on-quarter. SK Hynix, thanks to its record-breaking growth trend, led this net income increase. Equity method income on SK Hynix for Q2 recorded KRW 892.7 billion, which accounts for 77% of our consolidated pretax income. Meanwhile, it is worth noting that the value of our share of SK Hynix is around KRW 12 trillion as of today, which is approximately 60% of SK Telecom's market cap.

(foreign language) I would now move on to major business achievements. (foreign language) First, in MNO, the results of our customer value innovation program led to both a lower churn rate as well as marketing costs. The fact that handset subscribers still increased despite such cost-cutting efforts, thanks to data analysis-based customer targeting and optimal tariff plan suggestions, is encouraging. The number of handset subscriber net adds during the first half of the year is similar to that of all of last year. During the remaining half of this year, we will continue to change the telecom industry's landscape with even more innovative services, along with the recently launched T Plan price scheme.

(foreign language) This past May, SK Telecom solidified its position in the security industry through acquisition of ADT Caps. ADT Caps will not only contribute to our financial results based on a stable revenue base and profitability but also serve as a growth engine for expanding and reaping the fruits of the IoT business that the company has been carrying out. We look forward to finding ways to expand into the home service arena linked with our Smart Home platform as well as evolving into a next-generation security service, including intelligent integrated control and unmanned security solutions.

(foreign language) Moving on to achievements in strengthening our network infrastructure. With the auction in June completed without overheated competition, we secured competitive frequency spectrum band at the lowest-ever bidding price per unit. The spectrum we acquired in the 3.5 gigahertz band has great expandability in the future and is considered to be the most favorable frequency band for stable 5G service as it has no frequency interference. We will be sure to utilize the results of the auction to further enhance our competitiveness in the commercialization process of 5G.

(foreign language) Continuing on to achievements in the commerce business. 11th Street has come close to recording a quarterly profit by maintaining its competitiveness as the nation's leading commerce platform while also managing to cut costs. With continued efforts to strengthen its fundamentals, 11th Street, which will be spun off from SK Planet, also laid the foundation for further growth by successfully attracting a KRW 500 billion investment.

(foreign language) The acquired resources will be used in creating differentiated shopping experiences and establishing an integrated offering of related services. And in order to concentrate and effectively utilize the company's AI capabilities in this process, the current EVP of the Service Platform business division will head 11th Street as CEO and lead platform power growth.

(foreign language) Our media business also continues to remain strong. Due to a growing subscriber base and higher pay content usage, IPTV revenue recorded KRW 306 billion, up 25.1% year-on-year and 6.4% quarter-on-quarter. oksusu exceeded the 9 million subscriber mark during Q2 and further strengthened its position as the nation's leading mobile media service, with its monthly users growing by over 20% annually at 6.26 million. Going forward, we will expand strategic partnerships with players from home and abroad to enhance content competitiveness, which is key to strengthening our media power.

(foreign language) Investors and analysts, not only must we change the fundamentals of the MNO business, but we are standing before the grave task of reaching beyond the 5G era and laying the foundation for future growth. It will not be easy, but we ask for your ceaseless support and encouragement in our journey to innovate our business structure and enhance our corporate value.

(foreign language) Thank you.

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Jeong Hwan Choi, SK Telecom Co., Ltd. - Head of IR [4]

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(foreign language)

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Questions and Answers

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Operator [1]

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(foreign language) (Operator Instructions) (foreign language) The first question will be provided by Joonsop Kim from KB Investment and Securities.

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Joonsop Kim, KB Securities Co., Ltd., Research Division - Analyst [2]

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(foreign language)

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Unidentified Company Representative, [3]

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(foreign language)

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Joonsop Kim, KB Securities Co., Ltd., Research Division - Analyst [4]

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(foreign language) I have 2 questions. My first question is about your recently launched T Plan price plan, the price scheme. I'd like to hear about SK Telecom's views in terms of what kind of effect it will have on your market share as well as your network operation strategy. My second question is, we all know that your MNO revenue has been continuing to decline. So I'd like to hear about your strategies in terms of how you want to counter that and also what kind of outlook you have.

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Young Sang Ryu, SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director [5]

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(foreign language) First, thank you for your questions. (foreign language) Let me first address your question regarding the recently launched unlimited plan. (foreign language) As you may know, through the recently -- newly launched T Plan price scheme, we have completely reorganized the existing band data price plan, and we've also changed the pricing paradigm from individuals to family. We also provide more data usage volume, and we have simplified the previous 9-type price scheme lineup to one that is more intuitive. (foreign language) And more importantly, we believe that the benefits that come from family bundling will serve as a strong competitive edge unique to SK Telecom. (foreign language) And we believe it will be most favorable for SK Telecom as we have the largest market share. (foreign language) Currently, about 20% of subscribers opting for the T Plan price scheme are coming in as families, and it is very well received by our customers. And also, the bundling rate is continuing to increase. And we believe that it will have a lot of positive effect, which includes restoring our customer trust in our company as well as stronger subscriber retention. (foreign language) Also, by providing more data for our users, we believe that it will lead to greater media content consumption, and this will ultimately contribute to growing and energizing our company's media business. (foreign language) However, when it comes to data traffic because of the unlimited price plan we believe that it could be doubled in terms of the data traffic compared to before the launch. However, we had taken this into consideration throughout our network operation process, which means that we have already completed the field optimization process, and we also have the necessary data volume. (foreign language) Even if data traffic were to increase, we will not compromise on quality. And through consistent monitoring, we will be sure to manage the quality to be at its best. (foreign language) Next, let me address your question regarding the MNO revenue decline and our countermeasures. (foreign language) Due to higher discount rates provided on the selective monthly discounts as well as tariff reduction provided to the vulnerable class, it led to continued MNO revenue decrease into the second quarter. However, thanks to the growing handset subscriber base, based on reasonable price plan suggestions the revenue fall was improved to 1/3 of that of the first quarter. (foreign language) And during the second half of this year, through the positive effects of the reasonable price plans becoming settled within the market as well as the subscriber increase trend, we will do our best to minimize the annual revenue decline. (foreign language) At SK Telecom, in order for our users to be able to use the necessary data volume at the most reasonable price, we will continue to provide them with opportunities to select the optimal price plan for themselves. And by doing so, we expect that the level of higher price plan subscribers will be maintained at an optimal point. (foreign language) And as for increasing our subscribers, we will continue to come up with measures to increase new subscribers, including, for example, the foreigners segment. And so we plan to maintain the current handset subscriber growing trend without overheating the market. (foreign language) Going forward, rather than focusing on blind growth of its size, we will focus more on restoring genuine customer value. And through such changes, we will lower customer mobility and also achieve mid- to long-term revenue growth as well as a robust profit structure.

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Operator [6]

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(foreign language) The next question will be presented by Jisoo Jeong from Meritz Securities.

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Jisoo Jeong, Meritz Securities Co., Ltd., Research Division - Analyst [7]

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(foreign language) I have 2 questions. My first question has to do with your governance structure restructuring. I'd like to hear your plans on that. And my second question is 11th Street is continuing to show better and improved results, and I'd like to hear about SK Planet's strategy after the spin-off.

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Young Sang Ryu, SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director [8]

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(foreign language) Thank you, Mr. Jeong, for your questions. (foreign language) Let me first answer your question on our plans regarding the governance structure. (foreign language) First, I want to say that we are aware of the fact that the market feels like the decision is being delayed. However, we are aware of that, but we want to assure you that the processes is being carried out as planned. (foreign language) At SK Telecom, we believe that if we were to become too reliant on a particular industry then the benefits of the governance restructuring that we are aiming for will not be as great. (foreign language) And as such, we are focusing more on strengthening our ICT business portfolio. And as a result, we acquired ADT Caps, thereby preparing a groundbreaking turning point for the security industry. And through successful funding for 11th Street, we are now able to further solidify our position in the e-commerce market. (foreign language) So in order for our ICT affiliate companies across various fields, in order for them to have the corporate culture and decision-making process that will fit each of their industries as well as for them to be able to live up to their potential and also successfully and efficiently concentrate their capabilities, we are reviewing various options in terms of the governance structure, which include a holding company. (foreign language) Whether we will be -- what kind of divisions will be separated or how it will take place, nothing has been decided as of yet. However, we will make the decision considering various and multifacets of this issue, including the growth of SKT's ICT business group as well as potential synergies and enhancing value. (foreign language) However, meanwhile, we are still waiting for the approval of the FTC regarding the acquisition of ADT Caps, and there are necessary procedures that need to take place regarding restructuring of SK Planet. So we ask that you give us some more time. (foreign language) In order for us to grow ourselves into a new ICT leading company, we will look into various options to further expand our business portfolio, and we will be sure to find the optimal method as well as time that will contribute to corporate value enhancement. (foreign language) Let me now move on to your second question regarding 11th Street and its related business strategies. (foreign language) The e-commerce market, led by mobile, is growing at about 22% annually. And 11th Street, utilizing its strong mobile arena, which accounts for 60% -- over 60% of the total GMV, is securing the industry's top level of competitiveness in terms of GMV and unique visitors. (foreign language) And through the spin-off as well as successful funding, 11th Street has secured necessary resources needed for growth, and it will now be -- and it will now have a structure that will allow them to respond more flexibly to external competition. (foreign language) So through optimal product offering based on customer data as well as increased usage of 11th Street's unique application, focusing on its mobile use, and through improved UI and UX, it will be focusing most on strengthening its fundamental competitiveness. (foreign language) Through AI-based search functions as well as by seeking innovation based on new ICT, including AR and VR, 11th Street will continue on to secure a strong competitive edge, thereby achieving growth as well as profitability. (foreign language) After spinning off 11th Street, SK Planet will be merged with SK techx, which shares similar characteristics in terms of their respective business fields, and grow into a data and tech special company. (foreign language) By successfully utilizing the tech assets of both companies, namely the data solution and professional personnel, it will further grow the capabilities of SK Group's ICT family and also create a digital platform of its resources, namely OK CashBag and Syrup.

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Operator [9]

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(foreign language) The next question will be presented by Hoi Jae Kim from Daishin Securities.

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Hoi Jae Kim, Daishin Securities Co. Ltd., Research Division - Analyst [10]

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(foreign language) I have the following 2 questions. My first question is, with the recent acquisition of ADT Caps and spinning off of 11th Street, the core value of SK Telecom is becoming more clear. And if you were to connect your dividend policy with that, we believe that it will ultimately contribute greatly to growing your enterprise value. So could we maybe expect a change either this year or next year in terms of linking your gains on SK Hynix to SK Telecom's dividend? My second question has to do with the fact that the paid broadcast cumulative regulation has now expired, so we would like to hear if you have any M&A plans regarding this industry. And also, recently, we all know that Netflix has been very aggressively attacking the Korean market. And there's a lot of talks about Netflix forging partnerships with Korean players. What is your strategy regarding this area?

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Young Sang Ryu, SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director [11]

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(foreign language) Thank you, Mr. Kim, for your question. (foreign language) Let me first discuss your question on our dividend policy. (foreign language) As you know, SK Hynix, thanks to a very strong semiconductor industry, is expected to reach their all-time strongest results this year, and we believe that this growing trend will continue for the time being. (foreign language) We still stand by our basic principle in that if SK Hynix were to continue to increase their dividend payout based on very strong results, then we will most certainly review in a positive manner linking that to our dividend. (foreign language) Now the dividend size will have to -- we will have to look at that first from SK Hynix. But in order for our company to transform ourselves into an ICT leader, the investment for growth is necessary. So it will have to be approached from a comprehensive perspective, taking into consideration our business environment as well as financial structure. (foreign language) And so whether or not we will be linking that to our own dividend payout will be decided, taking into consideration SK Hynix' dividend amount as well as whether it will be sustained. (foreign language) However, it is a bit too early to speak of detailed shareholder return plans as of now, so we will be sure to share that with the market after necessary discussions. (foreign language) Let me now move on to your second question and discuss our media strategy. (foreign language) When it comes to our media content business, focusing and centering on our own media -- mobile media platform, oksusu, through partnerships with broadcasting companies, production companies and entertainment management companies, we are doing our best to acquire our content competitiveness as well as increase content investment in original content in the areas of drama series and entertainment programs. (foreign language) At SK Telecom, we do believe that a unique and differentiated content competitiveness is key to growing into next-generation media. And so in order to do so, we are reviewing various options of increasing the content investment size through strategic partnerships with players at home and abroad. (foreign language) And with the cumulative regulation being expired as well as discussions on guidelines for market definition taking place, we expect the overall regulatory environment to change. And also, there are movements on our competitor's side regarding approaching to acquire cable operators, so we do expect a change in the competition structure of the paid broadcast market. (foreign language) To effectively respond to the changing market competition structure and also to achieve sustainable growth of our media business, we are focusing on 2 things: first is strengthening our media platform based on paid broadcast subscriber base; and the second, increasing the value of our media business based on content competitiveness that will lead qualitative growth. (foreign language) Nothing has been decided yet, but we are open to all options, which include M&A with a cable TV operator or strategic partnerships with content companies. And so we plan to seek various options so that we can further strengthen our media and content platform competitiveness. (foreign language) Regarding any potential partnership that could be formed with Netflix, as we believe we have mentioned in the past, it could be reviewed in a positive way in the sense that it could provide our customers with new content and services. (foreign language) However, in the context of remaining fair with other companies within the industry, we believe that such discussions must be preceded by discussions regarding network usage fees and profit sharing and also whether or how it will be affecting the current domestic media ecosystem. (foreign language) Thank you.

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Operator [12]

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(foreign language) The next question will be presented by Hongsik Kim from Hana Financial Investment.

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Hongsik Kim, [13]

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(foreign language) I have the following 2 questions. My first question is when we look at your MNO results as well as SK Planet's earnings it's not up to our expectations or wishes, I'd say. You are becoming better, but it's not really up to our standards. So I'd like to hear about your plans to improve your earnings. I know that it's been a while but the former management talked about the fact that by the year 2020 we will be able to see a consolidated operating income of around KRW 2 trillion. So I'd like to hear your plans regarding how you will -- you plan to grow your businesses. And my second question is, I have heard the CEO talk about SKT achieving a SoftBank-type enterprise value growth. Now with 11th Street and ADT Caps, of course, SK Hynix is already a listed company, but I'd like to hear about your plans in terms of whether you plan to list these companies at all and also your overall strategy in terms of increasing your enterprise value.

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Young Sang Ryu, SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director [14]

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(foreign language) Thank you, Mr. Kim, for your question. (foreign language) Let me first answer your question regarding our plans to improve our earnings results. (foreign language) As you know, the regulatory environment and the changes that it's taking is not the most favorable for our industry. However, through innovation in our MNO business as well as improving and strengthening our media, commerce and security businesses, we hope to lay the foundation for further growth. (foreign language) Going into more detail. Although SK Telecom's MNO revenue did decrease year-on-year due to tariff cut pressures, however, based on growing subscriber numbers, we have managed to improve the decline -- the width of the decline itself. (foreign language) And I believe that we will be able to seek more growth opportunities through new business models once we introduce the commercial service for 5G. (foreign language) And when it comes to cost, during the first half of the year we refrained from destructive competition. And through customer value innovation programs, we recorded a record-low churn rate. And also, you see that the marketing cost has dramatically decreased as well. So as such, through customer value innovation efforts and other efforts that we are putting in, we hope to lay a foundation to improve our earnings of the core business as well. (foreign language) And also, SK Broadband is doing very well in both fixed and mobile media businesses. And by increasing -- and 11th Street is also increasing their efficiency as well as improving their results. And with now the recently acquired ADT Caps, we believe that all of these business areas will ultimately contribute to improving our operating income. (foreign language) Let me now move on to address your second question regarding a SoftBank-type growth. (foreign language) As you know, at SK Telecom, we are carrying out various non-MNO businesses as well, along with our core MNO business, namely media, security and e-commerce. And of course, we also have SK Hynix. (foreign language) In order to increase our enterprise value from remaining MNO business -- MNO player, we are pursuing innovating our business structure to grow ourselves into an ICT company. And at the heart of these efforts is our efforts to enhance the value of our non-MNO businesses. (foreign language) As for the IoT business in which we can expect great synergies to happen with the security business, through acquisition of ADT Caps, we have now laid the foundation for growth. And as you know, 11th Street we have now new funding available, so they have now secured necessary resources for growth. So we believe that 11th Street will be able to further solidify their position in the e-commerce market as well as achieve service sophistication. (foreign language) And as for the media business, we are focusing on acquiring a unique and differentiated level of content competitiveness, thereby increasing the subscriber base and enhancing the overall value. (foreign language) Taking aside SK Hynix, which is showing all-time best results right now, we also have our media business, security business and e-commerce business. And so we are going to focus on helping these each business portfolios be able to stand on their own feet. So we are looking at about 3 to 5 years in terms of listing these companies.

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Operator [15]

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(foreign language)

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Young Sang Ryu, SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director [16]

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(foreign language)

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Operator [17]

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(foreign language)

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Young Sang Ryu, SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director [18]

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(foreign language)

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Operator [19]

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(foreign language) The next question will be presented by Jong In Yang from Korea Investment & Securities.

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Jong In Yang, Korea Investment & Securities Co., Ltd., Research Division - Analyst [20]

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(foreign language) I have 2 questions. My first question has to do with investments that are going to 5G. We believe that you will begin to invest in 5G network rollout beginning late this year. So I'd like to hear about how much will be invested and when it will be invested for your spectrums on the 3.5 gigahertz and 28 gigahertz. And my second question has to do with the acquisition of ADT Caps. What kind of synergies do you expect it will be able to show? And also, what business divisions do you plan to focus most on in terms of creating these synergies with ADT Caps? And lastly, regarding your security business, is this to strengthen your existing market share? Or will you -- are you planning to pioneer into a completely new market?

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Young Sang Ryu, SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director [21]

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(foreign language) Thank you, Mr. Yang, for your questions. (foreign language) Let me first answer your question regarding the 5G CapEx plan. (foreign language) As of now, it is difficult for us to give you details in terms of the investment size and time line for 5G. (foreign language) However, for a rapid network rollout, we plan to invest first on the 3.5 gigahertz band, and we will begin investing in the 28 gigahertz after we have achieved a certain level of network rollout on the 3.5. (foreign language) Especially when it comes to investing into 28 gigahertz band, because of the spectrum band's certain characteristics, we have to think about the services that will best befit the network's characteristics. So we plan to invest -- to carry out so-called spot investments. (foreign language) So once the detailed time line and the amounts are set in place, we will share that later on with you. (foreign language) Let me now address your question regarding our business strategy after the acquisition of ADT Caps. (foreign language) As you know, this past May, we have acquired the management rights to ADT Caps in partnership with Macquarie. (foreign language) And as of now, we are waiting for FTC's approval so that we may conclude the acquisition process of ADT Caps during the third quarter. (foreign language) We believe that the security market will continue to grow, so by applying various technologies to ADT Caps, namely artificial intelligence, big data and IoT, we plan to establish an integrated security infrastructure so that we can transform into a new ICT-based security company. (foreign language) And as such, rather than focusing on the existing market share, we plan to pioneer into a new market. (foreign language) As for more specific plans and strategies, we will share those with you after the deal closes. (foreign language) Thank you.

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Operator [22]

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(foreign language) The next question will be provided by Stanley Yang from JPMorgan.

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Stanley Yang, JP Morgan Chase & Co, Research Division - Analyst [23]

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(foreign language) I have 2 questions. My first question has to do with the universal price plan. And I asked this because a lot of foreign investors are interested in this issue probably and because this is unseen in any other countries, so they are quite skeptical about whether it will actually be introduced. There are talks about how the government is reviewing such options, so I'd like to hear about your thoughts on that. And my second question has to do with the ARPU. ARPU numbers have been continuing to decline. And in fact, Q2 was worse in terms of year-on-year compared to Q1. So how far will that be? And for how long will the ARPU decline continue on? And could we expect any kind of ARPU uptake post 5G?

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Young Sang Ryu, SK Telecom Co., Ltd. - CFO, Head of Corporate Center & Executive Director [24]

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(foreign language) Thank you, Mr. Yang, for your questions. (foreign language) Let me first address your question regarding the universal price plan. (foreign language) As you know, a proposal regarding the universal price plan was made into the national assembly late June, so we are expecting the discussion to soon take place. (foreign language) And we truly hope for a reasonable outcome that takes into consideration the recent tariff cut efforts that have been taking place and also the actual benefits that it has caused as well as the customer benefits that come from autonomous market competition. (foreign language) And moving on to your second question regarding the ARPU outlook. (foreign language) Due to the growing number of subscribers opting for the selective monthly discounts, we feel that it is inevitable for the ARPU number to continue to decline for the time being. (foreign language) However, the rate at which the number of subscribers opting for the selective discounts is decreasing, so we believe that maybe by early next year we will be able to see the speed slow down. (foreign language) And I think that there is a wide consensus that the ARPU numbers can see a growth spurt after 5G, which will lead to greater per capita data usage. (foreign language) However, considering the fact that we live in an environment where many IoT devices are linked to the network and also new business models are being launched, rather than focusing on ARPU numbers we hope that we can all focus more on growing the overall industry as a whole. (foreign language) Thank you.

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Jeong Hwan Choi, SK Telecom Co., Ltd. - Head of IR [25]

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(foreign language) Thank you all for your interest in our company as well as your very good questions. Now this will conclude the earnings conference call for Q2 2018. Thank you.