SK Telecom Co Ltd (SKM) 2009 Q1 法說會逐字稿

(interpreted) Good afternoon. Today's conference call will consist of the earnings presentation on the first quarter 2009 by SK Telecom's CFO, Dong-Hyun Jang, followed by a Q&A session.

The conference call will last about one and a half hours with consecutive interpretation. Let me also remind you that all the forward-looking statements are subject to change, depending on the macroeconomic and market conditions.

Now let me present our CFO, Dong-Hyun Jang.

(interpreted) Good afternoon. My name is Dong-Hyun Jang, the CFO of SK Telecom. Thank you for taking part in our earnings conference for Q1 2009, despite your busy schedules.

Let me start with the earnings highlights for the first quarter 2009. The revenue for Q1 stood at KRW2,876.5 billion, while the rising average subscriber number led to a 1.4% increase in revenue year-on-year. The less number of business days brought down the revenue by 4.3% on a quarter-on-quarter basis.

The wireless Internet revenue amounted to KRW624.9 billion, which marked a 4.6% increase year-on-year, boosted by the expanding data fixed plan subscribers and SMS usage, and a 0.3% decrease quarter-on-quarter due to the transfer of MelOn business.

The marketing expense was KRW660.7 billion, which was a 13.8% decrease y-on-y and a 4.6% drop q-on-q. Although the seasonal factors in Q1, such as graduations and new school years, pushed up the acquisition cost, our overall cost reduction efforts helped us limit the marketing expense to 23% of revenue, which is at par with Q4 of last year.

The operating income rose 1.8% year-on-year and 20.3% quarter-on-quarter to KRW564 billion. The reduction in marketing expense contributed to the year-on-year increase, while the decrease in depreciation and amortization led to the quarter-on-quarter increase.

The net income was KRW316.7 billion, which was a 17.3% drop year-on-year, but a 20.4% increase q-on-q. The EBITDA recorded KRW996.7 billion.

The capital expenditure for the quarter was KRW348.4 billion, or 25.3% larger than the same period for the previous year, mostly covering WCDMA capacity expansion and quality improvement related investments.

That was the earnings highlights. And let me now move on to the overview of the future business environment, and our strategies going forward.

Although the mobile telephony market has shown a slight sign of expansion during Q1, we believe the market stabilization trend witnessed in the second half of '08 has been maintained. Under such market climate, SK Telecom maintained the 50.5% market share target; continued to upgrade our network quality; made efforts to improve distribution efficiency; while introducing the customer experience management program to offer innovative customer services, starting from the beginning of this year.

We plan to maintain our market leadership in our existing core business areas by proactively meeting the customer needs through efforts such as ensuring more choices for the customers with diverse handset line-up, including foreign handsets, and providing new values, leveraged and functionally-converged bundled products.

There are concerns about the decline or stagnation of wireless Internet ARPU due to SMS tariff reduction, and various customer value enhancement programs, such as tariff cap on teenage price plans. However, SKT plans to continue fueling the growth of the wireless Internet by strengthening the fixed mobile conversion services; by accelerating the open network trend; and by expanding the choice of smartphones.

Also to encourage the wireless Internet usage, we plan to diversify the price plans with tariff caps, such as [DataPerfect] price plans. We are also reviewing the launching of a new concept integrated price plan combining both the data call charges and information usage fees.

SKT believes the future growth opportunity lies in the global market development enabled by entry into new convergence areas, and creation of a win-win ecosystem. To that end, SKT is doing its utmost to create an ICT-based global blue ocean.

Such efforts are beginning to reap fruit in new business model developments such as next generation Internet businesses like open marketplace, and payment-driven convergence areas like T-Cash. We also plan to secure new revenue sources by expanding our individual user-based services to include the corporate business market.

In order to overcome the limitations of the domestic market, and to accelerate the development of new growth engines for the future, convergence and globalization are unavoidable. SK Telecom will be even more prudent in approaching large overseas investment, in light of the current global economic crisis. We will pursue creative, service-driven globalization, leveraging our technological leadership according to a clear set of investment principles and criteria.

Lastly, let me touch upon the shareholder returns. As was communicated in the beginning of the year, the cash dividend for '09 will be at a similar level as last year, barring extraordinary circumstances. As to whether we will execute a Treasury share buyback, it will be flexibly decided, depending on the changes in the market environment and business climate.

2009 will mark a critical year for SK Telecom, since it will be a year of solidifying the fundamentals for securing mid to long-term survival and growth platform. SKT is well aware of the fact that increasing enterprise value through growth is essential to enhancing shareholder value. We promise to do our best to turn the current crisis into an opportunity to leapfrog into the future.

Lastly, I would like to thank all the investors and analysts for your unwavering interest and support for SK Telecom. Thank you.

(interpreted) We will now begin the Q&A session. Please go ahead with questions.

Now the Q&A session will begin. (Operator Instructions).

The first question was provided by Mr. Dong-sub Yi from Daishin Securities. Please go ahead, sir.

(interpreted) I have the following two questions. First of all, my first question is regarding the SK Network leased line acquisition. If you have such plans, when would that acquisition take place? And if so, what would be the acquisition price involved with the leased line? And if such acquisition of SK Network leased lines is completed, how would that support SKT? And is this deal somehow related to SK Broadband as well?

The second question has to do with the MNP process. If you look at the figures for April this year, compared to the previous month as well as the previous quarter, it seems MNP subscription increase is increasing overall. So can you shed some light on the second quarter as well as the second half, regarding the marketing expenses and other such related guidances?

(interpreted) Let me begin addressing your question regarding the acquisition of the leased lines from SK Networks. First of all, we are currently reviewing the possibilities of acquiring the leased lines of the SK Networks. However, nothing concrete has been decided as of yet, so we will not be able to answer your question about the acquisition price as well as the timing. And we are currently still reviewing all those possibilities as we speak.

And you also asked about its relations to SK Broadband. However we have not considered any in-kind investment following the leased line acquisition from SK Networks, so we do not have any concrete details beyond that point.

Let me answer your second question regarding the market outlook for April or the MNP prospects, as well as the marketing expense-related outlook for the second half.

If you look back at the month of April of 2009, I believe that there was a slightly more heated competition between players. Now some players have been trying to continue the net addition trend through MNP that was realized in the first quarter, and some players were trying to make up for the lost market share in the MNP during the past quarter. So it is true that there has been a slight expansion in terms of competition in the MNP area. However, if you compare the level of competition against the first half of 2008, it wasn't as fierce as that.

And also, if you look at the future prospects, of course looking at the domestic and international economic situations, and if you recall the lessons learned from the first half of 2008, I believe that different telcos in the industry will refrain from overheated competition, so that we could not repeat the same mistakes of the past.

And as for SK Telecom, our stance that overheated, fierce competition in this market is not desirable, therefore we maintain that stance. And in order to maintain our market share of 50.5%, we will react to the market situation in a flexible manner.

The following question is presented by Mr. [Jong-In Yang] from [Hankuk] Investment & Securities. Please go ahead, sir.

(interpreted) I have the following three questions. First of all, if you look at the Q1 figures, your bad debt expense seems to have risen quite a bit, so could you share with us the reasons why? And regarding the bad debt expense, what is your annual guidance for the rest of the year?

And secondly, there have been a lot of media reports about you launching a specialized sales subsidiary, and PS & Marketing Company launching has been widely reported. So can you tell us the reasons why you are pursuing that launching, and expected effects coming from that subsidiary?

And thirdly, regarding the interconnection-related revenue, it has come down to KRW30 billion. If you look back at the '08 annual total, it was about KRW180 billion. Therefore, if you break it down to quarters, the figure is about KRW45 billion, but it has come down to KRW30 billion. So could you share with us why and -- the reasons why, and also shed light on the future outlook?

(interpreted) Let me first answer your question regarding the bad debt expense. After the month of March in 2007, we abolished the usage of the guarantee insurance on some of our situations. And after the abolition of such guarantee insurance options, there has been increasing bad debt starting from 2008, relating to those subscribers who churned out of SKT and still owed us money but did not pay up. Therefore, we -- our stance is to actually manage bad debt expense policies in a very conservative manner. However, going forward beyond the second quarter, we do not expect the bad debt-related provisioning to increase any further.

Let me now talk about the distribution-related subsidiary that we are launching. First of all, the launching of this distribution-related sales and marketing subsidiary was considered in the very first place in order to fill the gap which was left unaddressed by different distribution channels in the past. And we felt the need to more proactively deal with the fixed mobile conversions and bundling-related trend that is taking place in the market. Therefore, we have created a model, which could ensure a win-win situation, not only for SKT but also for our existing dealers.

So in the future, we will utilize this subsidiary in order to ensure future growth -- future channel growth for the future, and ensure the possibilities to sell more new types of products in the market. So to that end, we will enhance our capacity, and we will seek to balance the wholesale versus retail-related sales activities and we will try to optimize the channel portfolio and conduct various [CS] activities and we will continue to manage the most optimum number of dealers and agencies that exist in the market.

Let me now talk about the interconnection-related revenue. Actually when it comes to the interconnection revenue, if you compare the figure against Q1 figure of '08 versus Q1 of '09, seemingly it has come down slightly. However, it is because of the base effect of last year. In other words, last year we had a one-off KRW20 billion worth of additional interconnection revenue because of the readjustment of the interconnection fee with KT last year. So it just looks likely relatively it has come down, but it's the base effect.

For your information, interconnection revenue is very much affected by the subscriber numbers and also the call volumes. And it does not simply apply to our Company's activities but also all the other telcos in the fixed and mobile arena in the market as well. So it is quite difficult for us to predict it for the future exactly. However, assuming how the interconnection tariff -- the base tariff has not changed that significantly between '08 and '09, we do not anticipate the overall interconnection revenue to change too significantly.

The following question was presented by Mr. Mitchell Kim from Morgan Stanley. Please go ahead, sir.

Okay, great. Thank you. I'll just ask one question on other commissions which rose quite sharply in the first quarter, and I know that in your earnings release, you explained that an NPV of a handset installment plan has affected it. But can you tell me how much was the amount for NPV of the handset installment? And if there are other factors that's really driving this other commissions up, if you could provide some color?

And I was wondering why we don't see this type of expenses for KTF and LG Telecom but we do with SK Telecom, so if you could perhaps try to explain that, that will be very helpful. Thank you.

(interpreted) Yes, let me answer that question regarding other commissions and handset installments.

For now, regarding the handset installments, the cash discount difference is currently reflected for the first quarter in the amount of KRW12.7 billion. However, because we are going to apply changes of accounting in that regard, so such an account line item will not show up, starting from next quarter.

When I say there have been some changes to the system, it is as follows. If a subscriber opts for a handset installment ranging beyond a 12-month period, in other words, if it's longer than 12 months, then we would exempt their initial charges. Instead they would be bearing all the installment-related interest expenses themselves. So it would be borne by the subscribers. That's the change that I'm referring to.

The following question was presented by Mr. Hongseek Kim from NH Investment & Securities. Please go ahead, sir.

(interpreted) I have the following two questions. Recently there have been a lot of news reports about the launching and strengthening of smartphone line-up by SK Telecom. So regarding this year, how many models of smartphone launching are you expecting?

And also, I believe you earlier referred to the fact that you would be launching other types of new data products. Are those new data-related products going to be more price-competitive than now?

And the second question has to do with SK Broadband. It's been more than a year since SKT acquired SK Broadband, however, still we are witnessing that SK Broadband's business results are not that stellar. Therefore, I would like to ask you what SKT has gained upon acquiring SK Broadband, first of all. And in order to boost the earnings of SK Broadband for the future, what type of role do you think that SKT will have to play?

(interpreted) Let me first answer the smartphone-related question.

Within this year, including foreign smartphones, we are planning to launch the total of seven models, which will be about 10% to 12% of the entire handset line-up.

Next I will talk about the data products that we will be launching.

First of all, SKT wants to add or contribute to wider usage of wireless Internet, while reducing a telecom-related tariff burden on the part of the users. So we have been introducing tariff plans with caps, such as DataPerfect price plan. So we hope to expand this type of data price plan going forward. And, in order to facilitate this even further, we are thinking about launching a price plan which would cover not only the data traffic -- call traffic, but also the information usage fee as well.

Let me now talk about the effects coming from the acquisition of SK Broadband and also ways to boost the earnings of SK Broadband.

First of all, upon the acquisition of SK Broadband, we believe that we will be able to better meet the needs of the bundled product subscribers. By doing that, we will be able to enhance the subscriber retention and bring down the churn rate. And at the same time, we will be sharing the distribution channels together, and such co-marketing efforts, we believe, will contribute to the overall marketing expense reduction.

Especially regarding the time to market, regarding bundled products between the two companies, we are currently assessing that it has been rather successful up to date and also into the future, the two companies will collaborate further in order to maximize synergy impact.

The following question was presented by Mr. John Kim from Merrill Lynch. Please go ahead, sir.

Yes, thank you for the opportunity to ask questions. I have two.

The first pertains to marketing. Could you please elaborate on what has changed versus last year -- first half last year, so that you're expecting marketing costs will not rise as sharply? And if you could please relate this to the recent government approval of KT/KTF merger and how this affects your outlook as well, that would be great.

Second question on your global expansion or growth strategy. How has the management's view towards globalization changed versus the previous top management team? Thank you.

(interpreted) Let me begin by addressing the marketing-related question. Regarding the overall market size for 2009, because of the economic slowdown in the real economy recently, and with the increase of lockup contract-related subscribers, we believe that compared to the previous year, in 2009 we will see the slight edging down of the size in the overall market size itself.

When it comes to the subscriber numbers for '09 compared to '08, we expect a slight increase overall.

And if you look at the competitive landscape for 2009, of course there is the domestic and global economic impact, as well as the lessons learned from the first half of 2008. So I believe that all the operators in the market will refrain from competing too fiercely in the market. However, we always have certain variables that we have to keep in mind, such as a drastic change in the competitive landscape.

Let me now talk about the impact coming from KT/KTF merger. I believe that KT's merger with KTF will accelerate the process of bundled product-related competition, as well as the fixed mobile conversion trend.

And of course, during the process with which such competition continues, there might be some ups and downs, but it is my hope that the competition will not become too heated in the future. And rather, I believe that the two Companies could compete in a positive manner so that we could grow the overall convergence pie size itself for both Companies.

Let me now address the global markets. First of all, there has not been any stance change in the top management about the fact that globalization should be pursued. However, because of the recent economic downturn globally, the concurrent management stance is that we have to be even more prudent in approaching globalization. So in the near term, I believe that we would focus on major markets such as the US and China to develop the most competitive convergence business models, so that we could optimize our portfolios in those respective markets.

The following question was presented by Mr. [Stanley Yang] from Nomura Securities. Please go ahead, sir.

(interpreted) Yes, I have one question that has to do with the lockup contracts. I'm wondering whether your existing mandatory contract-based price signs are really having an impact on the marketing expense reduction?

If you look at the second half of '08, you began such a lockup contract arrangement, and ever since I believe that the marketing environment has stabilized and your marketing expenses are coming down as well. Currently the share of lockup contract subscription rate among your subscribers is at about 40% level. So how high do you believe that, that ratio will go up until the year-end? And also how is such a lockup ratio increase impacting your remaining marketing spend -- related expenditures?

And also, relatedly; among the lockup contract subscribers, what is the churn rate when compared to the overall subscriber base churn rate? Because I would assume that lockup contract-related subscribers should have lower churn rate in order to say that this is effective indeed?

And also if you look at the marketing expenses for this year, it seems that the retention commission has come down significantly. Do you think that it is also because of the expansion of the lockup contracts in your overall subscriber base?

(interpreted) Yes. Let me answer your questions about the lockup contracts. As of the end of first quarter 2009, among all the new subscribers, as well as those subscribers changing handsets, the percentage of those opting for lockup contracts of some kind, or those opting for the handset installment arrangement, in total amounts to about 98%. So we believe that such lockup contract arrangement is taking root quite significantly.

I believe that such a phenomenon is bound to contribute to customer retention impact going forward. And also in the mid to long-term perspective, it will definitively help stabilize the market while bringing down the marketing expense as well.

For now, among those subscribers subscribing to lockup contracts, there seems to be almost no churn rate that is being felt, so I believe that such low churn rate trend is definitely helping the bringing down of the overall churn rate for all the subscriber base as well.

The following question was presented by Ms. Gina Kim from ABN AMRO. Please go ahead, ma'am.

Hello, I just have one question. On page seven of your presentation material you have the more detailed breakdown of your non-op gains and losses. Could you tell me what the other non-operating expenses consist of? Because as I understand about KRW90 billion should be from derivative losses which should offset the foreign currency translation gains. But then we're left with another KRW100 billion of expenses that have increased year-over-year, which is why net profit decline was so severe compared to the moderate operating profit growth we saw.

(interpreted) Yes, let me answer your question regarding the non-operating expense. For your information, for SK Telecom we have foreign currency-related assets and liabilities and in order to hedge such volatility, we are hedging through various types of derivatives. And the valuation gain or loss on such derivatives are reflected under line items such as FX translation loss and valuation loss and derivatives, under the non-operating expense columns.

And to be more exact, most of the non-operating loss -- income -- expense-related losses came from the valuation loss on derivatives, impacted by the foreign currency exchange rates. And that's been mostly, and it should be looked at together with the rest of the items such as FX valuation gain and other types of derivatives-related valuation loss items as well.

Actually during Q1, because of the fluctuations in FX rate as well as the interest rate, in terms of the valuation loss on FX as well as derivatives, it all amounted to about KRW120 billion and that -- such an amount mostly deals with the global bond that has been issued back in 2007.

And I would like to elaborate a little bit on this particular point. When it comes to the FX risk on the global bond, it is 100% hedged through various derivative products. And also in terms of the global bond derivatives, it's a combination of the Korean won-denominated borrowing, plus the dollar-denominated bond purchase, and therefore when we calculate the present value on those particular items, on both the won and the dollar future cash flow, different discount rates apply. Therefore each quarter we are actually seeing the emergence of valuation gain or loss, but it does not involve any cash flow whatsoever.

But as you are well aware, regarding the global bond-related derivatives valuation gain or loss, it does not have any impact on the cash flow. Therefore at the end of the maturity of these global bonds, it will be shown as zero when it comes to gain or loss items.

Thank you.

The following question was presented by Mr. Sean Lee from Citigroup. Please go ahead, sir.

(interpreted) Following two questions. First of all it has to do with the newly-merged KT and how your competitive relationship is evolving. From KT's perspective is there any difference that you are feeling in terms of the competitive pressure, when you compare the competition against KTF alone? Or when, as you are competing against the newly-merged KT, is there -- if we assume that the newly-merged KT is more competitive, how are they more competitive compared to the past and how is SKT trying to deal with such changes?

And the second question has to do with the recent drop in the MOU and ARPU. It seems to be trending down. So what's the Company's view on that and how shall we forecast the future trend of MOU and ARPU?

(interpreted) First of all, let me first talk about MOU and ARPU. There are a couple of reasons behind the MOU drop in the first quarter. First of all, if you look at the first quarter 2009, the number of the so-called marginal subscribers, in other words below 10 years of age and older than 60 years of age, such a group of subscribers increased in number.

And the second reason was because of the added customer protection-related measures we have taken, such as the tariff cap on certain price plans.

And the third factor is the reason -- is because of the increasing special leased line services offered to corporate customers called machine-to-machine or M2M. That has increased slightly as well. And of course there has been some dilution impact coming from the MNP subscribers as well.

Regarding ARPU, because of the family discount as well as our net discount, ARPU has been slightly edging down. Especially regarding the ARPU reduction coming from wireless Internet, there has been the SMS tariff reduction and also the teenage price plan cap which has been placed, and also we've been suspending spam mail receiving. So we've been offering those services, so I believe that this is a type of growing pain in a transitional period.

And on top of that we had the revenue reduction because of the business transfer of MelOn, and various discount rates have been applied, and the overall economy has been rather sluggish. So all those things combined, I believe that the ARPU has edged down slightly.

However, SKT will try to address these issues by first of all coming out with various types of service line-ups and by introducing the so-called integrated price plan which comprises the data call charges as well as the information usage fees. And we will offer various types of fixed mobile convergence services and we will continue to pursue the open network strategies while we introduce more smartphones. So through all these activities, we will do our utmost to either maintain or increase our ARPU.

Let me now talk about your -- another question regarding our competitive relationship with the newly-merged KT. With the merger between KT and KTF, it would be only inevitable that we would face more challenging environment in the market.

For example, the newly-merged KT will have bigger cash resources, and they would have high -- faster speed with which they could introduce new price plans and bundled products. And I'm sure that by combining their distribution channels they would create a lot of synergy as well. So in order to deal with such a stronger KT, we would have to reinforce and enhance our competitive edges in those regards as well.

(interpreted) And also SKT will try to strengthen various integrated bundling and marketing services, combining the fixed-line services as well, and we will try to significantly enhance our qualitative competitive edge for the future as well.

The following question was presented by Mr. Han Joon Kim from Goldman Sachs. Please go ahead, sir.

(interpreted) Yes. I have the following two questions. First of all, it has to do with your newly-established subsidiary, PS & Marketing, which is a distribution arm of the Company, and I understand that your initial capital investment would be in the amount of KRW150 billion. However, currently the Company is not generating any revenue, so can we safely assume that all that investment will be reflected in the valuation loss on equity method for this year? And also, if the Company is going to need further capital going forward, how much additional capital injection are you thinking of?

And my second question has to do with your open Internet policy that you've been introducing, and you said that you will introduce various types of data price plans, and you would reinforce the smartphones. However, with such open Internet network strategy proceeding, how will that impact the trend of the data ARPU? Do you have any idea about how it will trend down, or trend up?

(interpreted) Yes. Let me answer your question regarding the valuation loss on equity method regarding the newly-launched distribution subsidiary.

As you have pointed out, because this Company is 100% owned by SK Telecom, whatever bottom line or the results that the Company delivers this year, will be fully reflected under the valuation gain or loss on equity method.

And because this is a newly-launched Company indeed, it would be quite early for us to attempt to forecast any profitability outlook for the Company at this particular point. So, as we proceed with the business, we will try to shed light on the profitability trend with all of you as soon as possible.

Next, let me answer your question regarding data ARPU. Basically, with the introduction of the fixed-price plans that are introduced, I believe that the frequency with which people use the data services, as well as the data traffic volume, are likely to increase. So with such efforts, we believe that continuous increase of data-related ARPU is feasible.

And in order to encourage usage of data-related services, we have to think about various aspects. First of all, from the demand perspective, I think that we need to provide the price tariff plans with caps in place so that they could comfortably use these data services. And from the infrastructure perspective, I believe that network opening strategies will ensure more contents-related facilitation from the supplier side.

And the third pillar would be the tools, which would be the smartphones. So more wide distribution, or penetration of these smartphones will contribute to the data ARPU as well. So, SK Telecom feels that wireless Internet revenue, going forward, has high potential to grow.

The following question was presented by Mr. Josh Bae from UBS. Please go ahead sir.

Yes, hi. Thank you for the opportunity. I just want to follow-up from an earlier question regarding the distribution subsidiary that you will be setting up. Could you please share with us what the revenue items and the cost items would be for this entity? And help us understand when you book equity method losses from this Company, would that mean that marketing expenses on SKT's P&L would decline?

(interpreted) Yes, let me talk about the revenue model for the new subsidiary. Basically SK Telecom's new distribution-related subsidiary will have the basically same business model as other dealers that are working with SK Telecom as today. However, they would be addressing more of those areas where existing dealers are not fully addressing. So whatever gray spots, or gaps, that we currently have, they will complement the existing dealers on that.

Therefore, just like other existing dealers or agencies, their main source of revenue will be various types of commission, such as initial commissions, or monthly commissions, that they would receive per subscriber.

The following question was presented by Mr. Jeff Kahng from Credit Suisse. Please go ahead, sir.

(interpreted) Yes, I have the following two questions. With the launching of the fixed-price plans, I'm wondering how that is impacting your network capacity. In other words, how much of data traffic increase can your current networks fully support, going forward? In other words, let's say you are currently running your capacity at 100%, and if the data volume in the future exceeds to maybe twice or three times as much, would your current network still be able to support that? If you could share with us more detailed numbers, I would very much appreciate that.

And, by any chance, in order to complement such capacity needs, do you have any plans to possibly upgrade quicker to WiBro systems, or to 4G LTE mechanisms sooner than expected?

And the second question has to do with your distribution-related subsidiary. Currently I believe SK Networks is distributing SK handsets at the moment, so if such a distribution subsidiary is established, would that activity be transferred to the newly-established subsidiary from SK Networks?

(interpreted) Let me first answer your question regarding the network capacity stemming from the increasing fixed-price plans.

Currently, we are closely monitoring and reviewing the impact of the growing fixed-price plan systems on our existing capacity. However, if you look into this, there are many different factors that could possibly impact the overall capacity demand. For instance, how much of the video calls are going to be used, and how much of the data volume will be used. And also how many different types of visual content-related services we would be additionally launching. And per subscriber, how much volume of data services and what patterns of services people use. All those different factors would definitely impact the overall network capacity.

And, as I mentioned before, we are planning to expand integrated price plans and various types of fixed-price plans for the future, and of course such an expansion is bound to have some impact on the network capacity in one way or another. However, when it comes to how much of such impact we could anticipate, we are actually watching very closely the dynamics of the data services, so we are in the process of analyzing it.

Let me now move on to the 4G or WiBro related question. As you are well aware, the 4G-related standardization has not been finalized yet, so we will take our time and we would be prepared to deal with either route, either LTE or WiMAX-related standard. So we will continue to look at the competitive landscape and we will continue to analyze the impact coming from the integrated price plans and the launching of different devices. So, upon looking at all these different factors, we will then prudently decide on the evolution path towards 4G.

And regarding WiBro, our existing stance still remains, in that we would be utilizing WiBro to support wireless data services with high speed and large volume requirements.

Let me now talk about the handset distribution which has been performed by SK Networks. As I told you before, our newly-established distribution subsidiary will be acting just like any other dealers in our existing system. Therefore, we will not have the handset distribution function moved from existing SK Networks to this new subsidiary.

(interpreted) Thank you for staying with us until the end of today's conference call. All your questions and interest will be contribute greatly to the improved management activities of our Company.

As was mentioned earlier, despite the formidable business challenges ahead, SK Telecom will do its best to sharpen the fundamental competitiveness, enhance our profitability and increase the shareholder value.

Once again we ask for your unwavering support and cooperation during 2009, to help SKT turn the threats into opportunities.

This concludes the CFO conference call for the first quarter 2009. Thank you.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.