QUOTE AND NEWS
Forbes  Sep 9  Comment 
Looking today at week-over-week shares outstanding changes among the universe of ETFs covered at ETF Channel, one standout is the WisdomTree Emerging Markets Equity Income Fund (AMEX: DEM) where we have detected an approximate $21.4 million dollar...
The Australian  Aug 4  Comment 
US-based Jacobs Engineering has accelerated cost cuts at its ­recently purchased $1.3 billion Sinclair Knight Mertz.
SeekingAlpha  Aug 1  Comment 
SK Telecom Co., LTD. (NYSE:SKM) Q2 2014 Earnings Conference Call August 1, 2014 02:00 AM ET Executives Hong-Kyu Park – IR Officer Soo-Cheol Hwang – Chief Financial Officer Sun-Jung Kim – Head, Marketing Strategy ...
Cellular News  Jul 21  Comment 
SK Telecom and Ericsson have demonstrated a key enabler for future 5G networks -- the so-called Elastic Cell technology which can boost mobile data speeds at the edges of cell boundaries. Click here for more.
Cellular News  Jul 9  Comment 
South Korea based SK Telecom says that it has signed a MOU with Ericsson for joint research for 5G-related technologies. Click here for more.
Cellular News  Jul 5  Comment 
South Korea's SK Telecom says that it has upgraded its LTE-A network to support theoretical peak download speeds of up to 225Mbps. Click here for more.
Market Intelligence Center  Jun 24  Comment 
SK Telecom Co Ltd (SKM) presents a trading opportunity that offers a 5.53% return in just 179 days. A covered call on SK Telecom at the $25.00 level expiring on Dec. '14 offers an assigned return rate of 5.53% or 11.28% annualized. This trade...
Market Intelligence Center  Jun 19  Comment 
Option-trade picking algorithms patented by MarketIntelligenceCenter.com found a trading opportunity with SK Telecom Co Ltd (SKM) that should provide a 5.80% return in just 184 days. Sell one Dec. '14 call at the $25.00 level for each 100 shares...
Market Intelligence Center  Jun 6  Comment 
After Thursday’s trading in SK Telecom Co Ltd (SKM) the algorithms behind MarketIntelligenceCenter.com's Artifical Intelligence Center picked out a trade that offers a 4.85% or 8.98% (for comparison purposes only), while providing 8.91% downside...
Cloud Computing  Jun 5  Comment 
Metacloud, Inc., a leader in deploying and operating OpenStack as a Service for some of the world’s largest companies, is pleased to announce a deal with SK Telecom subsidiary SK Planet. Established in October 2011, SK ...




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SK Telecom is the leading wireless telecom operator in South Korea, providing 3G voice and data services along with "convergence" services such as portals, mobile entertainment, satellite GPS, etc. They also have operations in Vietnam, the US and Mongolia as well as a significant stake in China Unicom.

Business

Market Cap: $16.8B (US$); Yield: 3.7% Valuation: Intrinsic Value: at least $40. Accumulation Range: $25 or better Risk-assessed Score: 3.10 (12.39% of price) [1]

SK Telecom, as the market leader in wireless (50.5% share), is designated a market-dominating entity and must operate under tighter restrictions than competitors KT Freecell (KTF) and LG. For example, SK's peak usage rate is 11% higher than their competitors. SK's self-posed market share limit of 52.3% ran through the end of 2007 but management has not enumerated their stance going forward.


Trends and Forces

Industry Specifics

This industry is heavily capital-intensive, most notably in the following 2 areas:

  • Infrastructure - companies must spend massive amounts of capital to build out networks, run cable, etc.
  • Market share - customer acquisition costs are high as wireless and broadband services are mainly price-based.

In fairly Mature Markets

South Korea is a fairly mature wireless market, with nearly 90% market saturation. Growth in the domestic market will have to come from increasing revenue in value-added services as well as getting customers to trade up the technology chain (ie from CDMA to WCDMA, WiBro, etc.) Moreover, The telecom industry is highly regulated in South Korea. Market leaders are required to adhere to more stringent guidelines than their competitors, allegedly to foster competition and consumer benefit. With an incoming, hardliner conservative President, diplomatic tensions with North Korea could ratchet up, leading to cross-border conflict. Finally, the incoming President has also vowed to lower mobile tariffs by 20%+ which has spooked investors away from the stock.

In 2006, the government lifted restrictions on handset subsidies, leading to fierce competition for market share among the three major wireless operators and compressed margins for all. And, corporate governance standards are arguably not as robust as in some Western countries. The S. Korean chaebols have gained some notoriety for not maximizing shareholder value, to put it diplomatically. SK Telecom is part of the SK Group, who has had some issues with corporate malfeasance in the SK Networks subsidiary, leading to fines and jail time for the culprits. SK Telecom leases 66% of their leased lines from SK Networks.

Like most of the chaebol, SK Telecom does engage in non-core activity and non-strategic investment. For example, they own a sizable stake in Posco, the steel company. Unfortunately, the rest of their record doesn't invite favorable comparison with Warren Buffett. Shareholders have to acknowledge that South Korean corporations may not be the most effective stewards of resources.[2]

Investments in new areas

The S-Fone venture is an interesting prospect, with SK seemingly increasing their share of new adds above their proportion relative to the market (20.6% of new adds vs. 9% market share). Also, Vietnam has a huge under-served population and with the government's blessings, the company has come up to own a 73% stake in the company based there. Management has made no mention of any interference or blockage by the Vietnamese government.

The company also has a sizable investment in CHINA UNICOM (CHU), ostensibly to build a relationship to take advantage of the Chinese market. However, other than the paper gains, little tangible gain has come out of this supposed strategic investment. As rumors have swirled for some time of a break-up of China Unicom, it is unclear what SK Telecom's strategy will be toward entering the Chinese market.

Competitors

One of their major Telecom compeitors are the KT Corporation in South Korea, is the second largest wireless provider in South Korea. Salient points of their company happen to be:

  • Over 90% market share in the fixed-line market
  • 44% share in the broadband market.
  • 32% market share in the wireless market
  • Relatively stable margins and earnings visibility in the near-future
  • Fixed-line capacity allows them to target businesses more effectively.
  • Flat to negative growth expected in the near-term.
  • Seemingly little to no ability to take market share in the wireless market.
  • Little to none Overseas Exposure



References

  1. Enlightened American Research
  2. SK Telecom Industry Risks
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