Morningstar Rating

Stock Research and Analysis

by Dan Baker

Bulls Say

SK Telecom dominates the Korean wireless telecom market with around 50% share. Its market share has been relatively stable over the past 10 years.
The handset distribution reform bill, which was implemented Oct. 1, 2014, promises to reduce overall marketing spending for the telecom companies by enforced reduction of handset subsidies, improving profitability and reducing volatility of earnings.
The firm invested in SK Hynix at a cyclical low point, and with the memory chip industry consolidating, the outlook for the business is positive for the medium term. Read more 

Bears Say

SK Telecom has spent significant money making investments outside Korea and in businesses outside its core competence. Despite SK Hynix's recent improvement, the USD 3.1 billion acquisition of this unrelated cyclical business may end poorly.
The government is likely to be successful in attracting a strong fourth operator into the market, which would severely disrupt market pricing and force SKT to compete very hard to prevent this new operator from establishing sufficient scale.
The firm's quarterly financial releases don't provide detailed commentary, particularly on its fixed-line telecom and Internet-related businesses, which makes following its progress difficult. Read more 

Management

We rate SK Telecom's stewardship as Poor.
SK Group owns 29.2% of SK Telecom's stock and has the right to name three directors to the board, including the CEO, giving it significant influence. SK Telecom's board also includes five independent directors.  Read more 

Profile

SK Telecom is Korea's largest wireless telecom operator, with 29 million customers. The firm also now owns SK Broadband (formerly Hanaro Telecom), which has 4.7 million   Read more 

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