SK Telecom - Possible Upside

Part 2 - Risk Detail
Part 3 - Possible Upside
Part 4 - Competitor Review
Part 5 - Valuation and Assessment
Part 6 - Management & Performance Targets

SK Telecom is truly dominant in the wireless space, despite its regulatory handicap. Its competitors, KTF and LGT, are able to undercut SK on prices and with the MIC easing restrictions on handset subsidies, the industry has seen marketing costs and commissions soar amidst a fierce battle for market share. In this environment, SK Telecom has more than held on to its market share and KT Corp, during last quarter's earnings, signaled a possible retreat from this tactic.
While the Vietnamese S-Fone venture is not yet cash flow positive, that market is extremely promising. That 84M country has only 25% penetration and S-Fone has impressively increased its market share to nearly 9% in a few years.
SKT margins are quite impressive, even when compared to KT Corp's financials, the majority of which are fixed-line business, traditionally a higher-margin business.
SK Telecom's proposed takeover of Hanarotelecom gives SK an opening into the fixed-line broadband business as Hanaro is the 2nd largest broadband service provider in South Korea (behind KT Corp). This addition may lead to SK providing bundled "triple play" packages which have proven popular in other markets.
Investors get a synthetic call option on North Korea. If North and South Korea ever reconcile and that market opens up, SK Telecom would be in great position to exploit that new market. Their position may even be better than KT Corporation as laying down line may be more costly, time-consuming and complicated than providing wireless service.

Go to Part 4 - Competitor Review of this report.

DISCLOSURE: Please see our portfolio page for all disclosures.

This report reflects the research and analysis I've performed on this company. It is provided for informational purposes only and does not constitute personalized financial advice nor an endorsement or solicitation to purchase stock in this or any other company. Please do your own due diligence or hire a financial advisor before making any investment decisions.

The author received no compensation and is not affiliated with the company reviewed in this report with the possible exception of being a shareholder. The author reserves the right to buy or sell the stock as deemed personally prudent without further notification

The Enlightened American

SK Telecom - Possible Upside