Oct. 30, 2009 (The Korea Times) -- By Kim Yoo-chul
Staff Reporter
SK Telecom, the nation's top mobile carrier, said Thursday that it will suspend plans to directly enter foreign mobile markets through mergers and acquisitions (M&A) for the time being.
Instead, the local carrier will put more emphasis on business-to-business (B2B) segments such as the industrial and public sectors by propelling its converged telecommunication services, the company's chief executive said.
"SK Telecom won't seek bigger M&A deals any longer to directly advance into foreign mobile markets. It will be more reasonable and profitable to push a service-oriented new business model," CEO Jung Man-won said in a press conference held at the company's headquarters in northern Seoul.
"The key point for the strategy change is that SK Telecom (NYSE:SKM) will work with companies in the financial, construction, retail and healthcare industries to sell them telecom solutions," Jung said.
Some 3 trillion won will be invested over the next five years to put the service-related business on a stable footing. In the local market, SK Telecom and a conglomerate are reportedly in talks to supply distinctive solutions.
Meanwhile, a company spokeswoman said SK and Cisco of the United States have engaged in detailed talks to boost their business partnership, though she declined to give further details.
Jung said the carrier will strengthen services by increasing the productivity of other industries with a target of generating 20 trillion won or $17 billion in total revenue from the sectors in 2020.
By then, over half of total yearly revenue will come from overseas sales. SK aims to reap a total of 40 trillion won in income ¡ª 20 trillion won each from solutions and its traditional mobile business.
"South Korea's mobile carriers need to break away from their high reliance on individual mobile users. As a leading player, we will collaborate with other sectors," said the executive.
"A type of Internet telephony service, allowing users to switch between fixed-lines and mobile networks using a single handset, can't be the right answer as an alternative cash-cow. As a result, SK Telecom won't strike a merger with its wireless unit SK Broadband for a considerable period of time," he said.
The move is in contrast to its rival KT, which has been strengthening its fixed mobile convergence (FMC) product portfolios for households.
SK Telecom exited the U.S. market last year, selling its struggling mobile unit Helio to Virgin Mobile USA. (NYSE:VM) Last month it also sold back its stake in China Unicom (OOTC:CHUFF) for $1.3 billion.
SK Telecom saw a 25-percent rise in its quarterly net profit ending on Sept. 30 due to cost cuts, an increase in subscribers and good sales of its wireless Internet data service, the company said in a regulatory filing.
Sales for the third quarter rose 5.4 percent to reach 3.08 trillion won from 2.9 trillion won year-on-year, while quarterly operating profit rose 23 percent to 618.8 billion won.
Net profit during the July-September period was 415.9 billion won, up from 333.6 billion won a year ago.
"Marketing expenses decreased for the latest quarter after strong calls from the nation's top telecom regulator. Good sales of mobile Internet services have helped us save our bottom line," a company spokesman said.
According to the filing, marketing expenses in the third quarter rose 15 percent to 834 billion won from 728 billion won a year earlier, but dropped 12 percent from the second quarter's 949 billion won.
SK's wireless Internet sales, which were the critical contributor for the quarter, rose 7 percent to 662 billion won from 619 billion won a year earlier.
Analysts say the fourth quarter will be a challenging period for SK due to a reduction in its mobile service charges.
All three of South Korea's telecom players have agreed to cut their mobile rates under an order by the regulator.
