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SKT reports 5G revenue boost despite virus impact

SK Telecom has reported a 6.4% fall in operating income as the coronavirus and 5G marketing and spectrum costs took their toll in Q1.

But the South Korean telco's closely watched 5G business helped drive up revenue in its core mobile unit, making up for roaming revenue lost as a result of the coronavirus, the company said Thursday.

It said higher data use by 5G customers had raised mobile service revenue by 4.4% and lifted ARPU 1.9% year-on-year.

CFO Yoon Poong-young said on an earnings call that the virus had knocked "10% to 20%" off 5G subscriber takeup. He estimated the year-end number would be as much as 15% below the target of 6-7 million.

Despite the slowdown, SKT added 564,000 5G subs in the quarter – its highest since launch 13 months ago – to reach 2.65 million, just under 11% of the total customer base.

The cost of acquiring those customers weighs on the result, however. Marketing expense, although down on the previous quarter, is up 13.5% from last year.

The company reported net income down 17.9% to 306.8 billion won (US$250 million) thanks to lower contribution from chip unit SK Hynix, although top-line revenue rose 2.7% to 4.45 trillion won ($3.64 billion).

Yoon said because of the growing uncertainty caused by the pandemic, including the slower 5G takeup, "we are revisiting our strategy and management plans that were set earlier this year ... it is very difficult to predict when these can turn around."

Yoon also backed away from a commitment to the Ministry of Science and ICT to boost capital spending in the first half.

He said the operator would review capex in relation to demand and overall investment levels but "we do not see capex being increased in first half of the year."

Yoon said 5G had delivered continual mobile revenue growth since Q2, and this year it aimed to discover new services as well as grow the subs base.

"While the effects of COVID-19 slowed the revenue growth trend, we expect a steady growth due to 5G service expansion and data usage increase," a company presentation said.

Besides 5G, Yoon cited SKT's partnership with Singtel and AIS to offer gaming in southeast Asia, and Wavve, a video streaming JV with local broadcasters, as sources of growth.

Wavve has just signed a deal to supply Korean-language content to NBC Universal and expects to invest 60 billion won ($49 million) on original content this year.

— Robert Clark, contributing editor, special to Light Reading

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