0

Volume 1

Nov. 2012

COMPANY REPORT

“SK Telecom:

Entering the Transition

Period for Value Increase”

1

SK Telecom transitioning for value growth

SK Telecom’s competitive advantage will further magnify as the market cools down

EV to appreciate in-line with ARPU turnaround; LTE ARPU, an important indicator

LTE network efficiency and longer use of technology to enhance MNO growth and profitability

Rapid paradigm shifts from fixed to mobile provides significant growth potential in mobile

games, ad and commerce; SK Planet’s current value estimated at 1~2 trillion Won

B2B solutions, healthcare and fixed/mobile IPTV businesses to show strong growth

SK Telecom‟s competitive advantage to amplify as market competition stabilizes

Since 2007 the market experienced heated competition when WCDMA network and smartphones were

introduced. But as the respective penetration rates reached 30~40%, market competition subsided. A

pattern which is expected to be replicated in the LTE market next year

In addition, reduction in costly subscriber acquisition activities and increased focus on retention and

internal handset upgrades are expected as:

each mobile operator completes their nationwide LTE network rollout,

high-ARPU LTE subscribers‟ contracts start to mature, and

SK Telecom‟s (“SKT” or the “Company”) introduction of early contract-termination penalty policy this

November (other operators are expected to follow suite) reduces market mobility

The expected launch of iPhone5 may spark competition, but considering that the entire iPhone market in

Korea is estimated at around 5%, the impact is expected to be limited

WCDMA, Smartphone, LTE Penetration and Marketing Expense Trend

2

SKT

64%

44%

19%

19%

16%

47.0% 45.2% 50.2%

14.6%23.5%

28.5%38.5% 31.3%

21.3%10%

30%

50%

1Q12 2Q12 3Q12

Given operators‟ core competitiveness and subscriber base,

the most significant assets, the market is expected to revert to

the previous structure over the mid- to long-term, with SKT

maintaining its No. 1 market position

As the market stabilizes, SKT‟s numerous competitive

advantages, including service offerings, network quality, and

customer services, will become more pronounced

No. 1 in three major customer satisfaction surveys for 13 consecutive years

SKT, the clear overall leader in the telecom industry, has been ranked first by NCSI (National Customer

Satisfaction Index) and KCSI (Korea Customer Satisfaction Index) for 15 consecutive years and by KS-SQI

(Korean Standard Service Quality Index) for 13 consecutive years

These awards clearly indicate SKT‟s inherent competitive edge in call quality, wireless internet and handsets

offering, and an unmatched customer service experience

Note: Total customer satisfaction scores for each respective survey

SKT‟s differentiated services continue to contribute to increasing customers‟ mindshare. In a recent survey by

Cetizen, of nearly 3,400 people who intent to buy an iPhone5, 64% chose SKT as their preferred service

provider. The primary deciding factors mentioned were LTE quality, membership benefits, and customer

services

Preferred Operator for iPhone5 Reasons for Preferring SKT

Source: Cetizen.com, Oct., 2012

LTE Net-add Market Share

LTE Quality

Membership

Others

AS & CS

SKT

KT

LGU+

NCSI KCSI KS-SQI

3

33

52

0

10

20

30

40

50

60

Blend LTE

3Q12 ARPU

EV will increase as ARPU rises

In the past, the growth of the telecom industry was largely driven by rising penetration rates and ARPU.

As the penetration rate reached saturation, the primary telecom value driver started to mirror ARPU trends,

which slid due to tariff cuts and emergence of disruptive business models

However, the recent reversion to a positive sloped ARPU, a trend that is expected to continue for some

time, will continue to enhance the value of telecom operators

LTE ARPU is the main indicator of future growth

SKT‟s total ARPU is expected to show a prolonged period

of positive growth. The Company leads the LTE market

with over 6 million subscribers as of October, but due to

its large +26 million subscriber base, the proportionate

growth is slow. However, the fact that SKT‟s LTE ARPU is

nearly 60% higher than the blended ARPU allows the

Company to enjoy an overall ARPU growth over an

extended period

SKT continues to realize over 2/3rd of new LTE subscribers

signing up for the LTE62 (monthly plan of 62,000 Won) or

higher price plans. Furthermore, the Company is

confident that it will maintain the highest LTE ARPU in the

Korean market, as was the case with 2G and 3G ARPUs

LTE network efficiency to improve profit prospects

The LTE network is more efficient from a cost and technological standpoint compared to that of 3G, i.e. it

is more effective in managing data and expectations are that the LTE will remain as the primary

technological platform for a significantly period of time

Compared to 3G technology, LTE‟s spectral efficiency is 3-times greater and increases further with the use

of LTE-Advanced, which boasts a significantly higher data throughput speed. In addition, LTE equipment is

data-centric, therefore is less expensive than the voice and data-based 3G equipment

Transmission Speed Comparison among Networks & Technologies

WCDMA(R4) HSDPA(R5) LTE(R8/R9) LTE-A(R10)

Commercial deployment Dec. 2003 Apr. 2006 Jul. 2011 2H12 (expected)

Bandwidth 1FA 2 X 5MHz 2 X 10MHz 2 X 40MHz

Speed (DL/UL) 2M/384Kbps 14.4M/384Kbps 75M/23.5Mbps 600M/188Mbps

Note: LTE - 2 X 2 MIMO (Antenna technology, “Multiple Input Multiple Output”), LTE-A - 4 X 4 MIMO

„000 KRW

4

Given that discussion for 5G technology has yet to begin, SKT expects 4G to be the primary mobile

platform for about 10 years (from concept develop to standardization, it takes approx. 5 years, and another

5 years for commercialization). Whereas, the previous 2G and 3G networks were followed by successive

technologies within 5~6 years of commercialization

Technology Standardization Trends

LTE(R9) LTE-A(R10) LTE-A(R11) LTE-A(R12)

Time of standardization

discussions ~‟09.12 ~‟11.3 ~‟12.9 ~‟14.6

Note: The greatest difference between 3G and LTE technology is the adoption of OFDM and MIMO technology. There are no indications of such

significant technological changes and discussion for 5G has yet to take place

5

SK Planet‟s leading position in the expanding mobile games, advertising and

commerce markets to contribute SKT‟s corporate value growth

IDC projects by 2016, more global Internet users will access the Internet through mobile devices than

through PCs

Cisco expects the average mobile network speed to increase 9-fold to 2.9 Mbps by 2016, up from

315 Kbps in 2011, and that the number of mobile devices will exceed the world population of 7 bn

in 2012 and reach over 10 bn by 2016

In Korea, LTE penetration is expected to reach over 70% by 2015, up from 25% in 2012

In anticipation of such market developments in the mobile space, SKT spun-off SK Planet last year.

Leveraging its rich experience in mobile contents and services, SK Planet (“SKP”) continues to solidify its

leading position as No.1 mobile platform player

This section will focus on SKP‟s market position in the rapidly growing mobile games, advertising and

commerce businesses

T store: Developing and expanding the Digital Content Marketplace with mobile games

As evidenced by the recent popularity of SNS-based games in Korea, the spread of smartphones is

spurring growth of the mobile-games business. This is largely in-line with growth projections for overseas

and Korean mobile games markets CAGR of 17.7% and 54.1% YoY, respectively by 2015

Given the ① the portability of mobile devices, ② continued improvements in network and devices, and

③ the increasing use of mobile platforms such as mobile SNS, the growth of mobile games market is

likely to exceed expectations

While intensifying competition among mobile game developers is increasing development risks and

pressuring margins, mobile platform companies are exposed to less risk and enjoy much more stable

profits

SKP has made a solid entrance in the mobile games market segment and is expanding into video, music

and e-books. By continuing to differentiate its mobile platform, SKP aims to expand its Digital Content

Marketplace globally. In 3Q12, T store, the largest app platform in Korea with nearly 360,000 listed items

and over 17 mn users, reached the 1 bn cumulative download milestone with sales of games accounting

for 60% of T store‟s revenues

To further differentiate T store‟s game offerings, SKP plans to expand into game publishing business in

order to secure games on a preferred status. Furthermore, through partnerships with SEGA and TAT JOY

(No.1 global platform advertising company), SKP is strengthening its global game sourcing base to

improve its competitiveness and profitability

6

T ad: To monetize core SKP businesses to pursue growth

Mobile ad market is still in its infancy, overlooked by advertisers due to the perceived lower adverstising

impact over the smaller screens of mobile devices. However, as the reach of mobile devices continues to

expand, and consumers‟ usage pattern becomes increasingly mobile-centric vs. PCs, the focus will shift to

the rapidly growing mobile ad market

Globally, the mobile ad market is projected to jump from $6.4 bn in 2012 to $23.6 bn in 2016. The

Korean market, ranked 4th following the United States, Japan, and the United Kingdom, is expected to

grow from $0.45 bn in 2012 to $0.76 bn in 2016 (eMarketer, Jul. 2012)

SKP‟s T ad business is well positioned to capitalize on this growing mobile ad market, further enhancing its

ad business portfolio of SMS/MMS push ads, LBS ads and in-app. ads. In-app. ad is rapidly becoming

one of the preferred mobile ad segments with hits on SKP reaching 6.5 bn monthly page views in 3Q12

SKP‟s competitive advantages in the mobile ad market stems from ① T store, Korea‟s No. 1 apps

marketplace, which boasts a significant reach, ② its expansive customer base, largest in Korea, that allows

for effectively target marketing, and ③ its years of experience in the mobile industry. In 2013, SKP plans

to leverage its strengths and assets to intensify efforts by entering the SNS ad market and utilizing its

various platforms such as T map, Cyworld, NateOn and 11th street to pursue an integrated new media ad

business

Games

60%

VOD

20%

Other

20%

T Store Sales MixMobile Game Market

Overseas market CAGR: 17.7%

tn Won

320450

540620

690760

0

250

500

750

1,000

11 12E 13E 14E 15E 16E

Korean Mobile Ad Market

Source: eMarketer, Jul. 2012

$ mn

1.3

6.5

0

2

4

6

8

3Q11 3Q12

bn PV

T ad In-app. ad Metric

tn Won

Korea market CAGR: 54.1%

Source: IDC 2012, Gartner and Samsung Securities

7

Mobile 11th street: Outright leader in the m-commerce market

According to Gartner, global mobile commerce market is projected to grow from $73.5 bn in 2012 to

$234.1 bn in 2015. The Korean market is also forecast to show strong growth. Daishin Securities

anticipates the market size to jump from 1 tn Won in 2012 to 2.5 tn Won in 2015

A recent survey by KCC (Korea Communications Commission) of smartphone usage patterns found over 60%

of smartphone users surveyed have used mobile shopping and 35.5% of those users mobile shop at least

once a week. Future growth prospects of the mobile commerce market continues to gain momentum

due to increases in ① accessibility of mobile shopping, ② regulatory ceiling for mobile device-based

payment (Currently, 300,000 Won), and ③ awareness/acceptance of and enhanced security of mobile

payment

SKP‟s mobile 11th street is Korea‟s leading mobile open-market shopping destination with more than 50%

of the market. Through 3Q12, SKP recorded over 11 million download of the 11th street app. and

cumulative GMV (Gross Merchandise Value) more than twice that of last year‟s total of 81 billion Won

Mobile 11th street, optimized for smartphones, has a friendly user-interface that makes it convenient to

search and buy product over a secure payment process. Its marketing in conjunction with OK Cashbag,

Korea‟s largest membership program, will further differentiate mobile 11th street, which expects GMV to

more than double in 2013

0.6

1.0

1.4

2.0

2.5

0

1

1

2

2

3

3

11 12E 13E 14E 15E

Korea m-Commerce Market

Source: Daishin Securities

Note: The market is composed of openmarket, and various

shopping malls, including social and specialty malls

tn Won

0

20

40

60

80

3Q11 4Q11 1Q12 2Q12 3Q12

Mobile 11th street GMVbn Won

8

SK Planet‟s current value estimated at 1~2 tn Won

The primary businesses at SKP; T store, 11th street and T map, are on a firm growth path. Especially in the

mobile space where the market is rapidly evolving to higher speed networks and adoption of smartphone

devices continues to quicken

Sums of the parts comparison valuation of SKP‟s businesses, including its listed subsidiaries indicate a

potential value in excess of 2 trillion Won. Given that the company is still in its initial growth phase, the

financial multiple-based valuation is premature. However, even on EV/EBITDA and PER comparisons to

possible Asian peers place its value at 1.1-1.6 trillion Won.

Sum-of the-Parts Valuation

Business Basis of valuation SK Planet

1)

Company Metric EV (tn Won) Metric EV (tn Won)

T store2)

Cumulative downloads

750 m 0.12

Cumulative

downloads: 1,240 m 0.2

11th street3)

Market share 39.2% 1.6 Market share over 30% 1.27

Hoppin4)

2 m paying subs 2.2 110K paying subs 0.12

SK Comms Market cap. 305.7bn Won (Nov. 16, 2012) Ownership 64.6% 0.20

Loen Market cap. 342.7bn Won (Nov. 16, 2012) Ownership 67.6% 0.23

T ad 400% YoY increase in in-app ads to 6.5 bn PVs in 3Q12

Korea mobile ad market size to reach $540 m in 2013 (eMarketer) α

T map Monthly active users of 5.85 m. Use of location API for B2B solutions

business. Cooperative efforts with global car makers (Renault Samsung) α

Tic Tok (SNS) Registered users of 10.25 m, 16 m app. downloads

(Global launch of Tic Tok Plus in Oct. 2012) α

Implied SK Planet value 2 + α

1. Based on expected 2012 results

2. Appia, provider of +140,000 apps in approx. 175 countries, is an independent app/content marketer who secured funding on Mar. 2011 3. Valuation attributed to G market when eBay acquired the company in Apr. 2009 4. Valuation of Hulu when the major shareholders bought shares from existing shareholders on Apr 2012

Asian Peer Multiple Valuation

EV/Sales EV/EBITDA PER

Asian Peer1)

Median ~ Mean (x) 3.0 ~ 3.5 7.3 ~ 8.9 15.8 ~ 18.0

Implied SK Planet value2) (tn Won) 3.2 ~ 3.8 1.3 ~ 1.6 1.1 ~ 1.3

1. Based on 19 Asian Internet/software companies

2. Based on expected 2012 results

9

1.1

1.5

3.0

15%

20%

50%

0%

50%

100%

0

1

2

3

11 12E 15E

B2B

Solution portion

tn Won

B2B solution business to show strong growth as ICT development spurs innovations in

connectivity

The proliferation of the smart devices and advancements in ICT technology such as HTML5 and NFC are

stimulating demand for connectivity and accelerating convergence in the ICT space. As such, there has

been a steady rise in need for various B2B solutions

Indeed, with the B2B solutions business showing strong double-digit growth, SKT expects solution

revenues to contribute 50% to total B2B revenues by 2015. The five core business segments that SKT is

focusing are Smart Store, Smart Work, Smart Cloud, Green & Safety, and M-Ad & Payment

SKT B2B Sales Forecast Core solution business

Aging population, advancements in ICT and medical technologies provide significant

upside potential for healthcare

Rising average age of the population, increasing social

awareness of health-related issues, coupled with

advances in ICT and medical technologies have created

a rapidly growing healthcare industry. By 2014, the

Korean healthcare market is expected to move above 3

tn Won, largely driven by growth in general healthcare

management needs

To take part in the rapid growth of the healthcare

industry, SKT is focusing on gaining core competencies

in diagnostic and healthcare management. To this end,

it ① invested in NanoenTek, a PoCT (Point of Care

Testing) device company, ② established a joint venture

with Seoul National University Hospital called „Health

Connect‟, and ③ invested in a Chinese molecular

diagnostics device company, Tianlong in Sep.

SmartStore

M-Ad &Payment

SmartWork

Green &Safety

5 CoreSolution

SmartCloud

1.0

2.0 0.3

0.6

0.3

0.5

10 14E

Silver

Medical

Wellness

Source: Korea Health Industry Development Institute

Welness : Healthcare services to the general public

Medical : Diagonosis and treatment services for the ill

Silver : Medical services to seniors, over 65, or the disabled

Domestic Smart Healthcare Market

tn Won

3.1

1.6

10

Strong growth potential for IPTV as digital broadcasting becomes the standard and

market acceptance of mobile IPTV expands

By 2015, Korea‟s broadcasting market is

projected to rise to 3.6 tn Won with mobile

contributing another 0.5 tn Won. As the fixed

IPTV user-base continues to expand and the

robust LTE network continues to spur growth of

mobile IPTV, SKT‟s IPTV service subsidiary

promises to show meaningful growth

0%

20%

40%

60%

0

2

4

6

8

10

9 10 11 12E 13E 14E

Subs

IPTV/High-speed internet

Korea IPTV Market

Source: Hyundai Securities

m

11

Summary

MNO business poised to show value growth

Prospects for profitability continue to improve following the early LTE market competition. As

implied in overwhelming lead in customer satisfaction surveys, SKT‟s competitive advantage in

network, service offerings and customer services will only magnify as the market stabilizes

The ARPU uplift impact of LTE, pushing up overall ARPU for the first time in many years, points to

rising corporate value. SKT leads the industry with the highest LTE ARPU, and a profitable 2G and

3G subscriber base; a combination that assures extended growth and profitability

Initial LTE investments have been complete. LTE‟s higher technological and network efficiencies to

lend to a more stable investment environment

SK Planet, one of SK Telecom’s growth pillars, contributing to growth and corporate value

SKP aims to become a global wireless platform company by leveraging its growing businesses;

Digital Content Marketplace, commerce and social network

SKT is confident that the market will accord SKP its well earned-value as the leading mobile platform

company, contributing the SKT‟s growth

SKP‟s operating and financials implies a current EV of 1~2 tn Won

Growth of B2B solutions, healthcare, and IPTV businesses to enhance SKT’s value

Widespread use smart devices and advancements in ICT technology are stimulating demand for B2B

solutions. SKT is targeting 1.5 tn Won in solution sales by 2015

Healthcare industry is showing rapid growth on the back of increasing social awareness of/need for

healthcare, and advances in ICT and medical technologies. SKT is positioning itself with the key

players to spearhead growth in the areas of diagnostics and healthcare management services

SKT to enhance its growth momentum in the IPTV market, by strengthening its presence in the

mobile IPTV segment

12

Contact Info.

IR Contacts Tel No. e-mail

Hong Kyu Park 82(0)2-6100-4509 hongkyupark@sk.com

Jeong Hwan (Jack) Choi 82(0)2-6100-7203 jack.choi@sk.com

Dong Seop Kim 82(0)2-6100-1464 sunson@sk.com

Seung Oh Yoon 82(0)2-6100-1632 monsta@sk.com

Hun Lee 82(0)2-6100-1334 hun.lee@sk.com

Woo Sun Cho 82(0)2-6100-1638 woosun.cho@sk.com

In Kyoo Joo 82(0)2-6100-1625 inkyoo.joo@sk.com

13

Disclaimer

This material contains forward-looking statements with respect to the financial condition, results of operations

and business of SK Telecom and its subsidiaries (the “Company”) and plans and objectives of the management

of the Company. Statements that are not historical facts, including statements about the Company’s beliefs and

expectations are forward-looking statements. Such forward-looking statements involve known and unknown

risks, uncertainties and other factors which may cause the actual results or performance of the Company to be

materially different from any future results or performance expressed or implied by such forward-looking

statements.

The Company does not make any representation or warranty, expressed or implied, as to the accuracy or

completeness of the information contained in this management presentation, and nothing contained herein is, or

shall be relied upon as, a promise or representation, whether as to the past or the future. Such forward-looking

statements were based on current plans, estimates and projections of the Company and the political and

economic environment in which the Company will operate in the future, and therefore you should not place

undue reliance on them.

Forward-looking statements speak only as of the date they are made, and the Company undertakes no

obligation to update publicly any of them in light of new information or future events. Additional information

concerning these and other risk factors are contained in the Company’s latest annual report on Form 20-F and

in the Company’s other filings with the U.S. Securities and Exchange Commission (SEC).