SK Telecom Co Ltd (SKM) 2010 Q1 法說會逐字稿

Good afternoon. Today's conference call will consist of the opening remarks by SKT's CFO Dong-Hyun Jang on the first quarter results of 2010 and other matters of your interest, followed by a Q&A session. To help deepen your understanding, executives of relevant business areas will also take part in the call.

Today's conference call will be conducted with consecutive interpretation. Let me also remind you that all the forward looking statements are subject to change depending on the macro economic and market environment. Let me now invite our CFO, Dong-Hyun Jang.

Good afternoon. My name is Dong-Hyun Jang. I'm the CFO of SK Telecom. Thank you for taking part in today's earnings conference call for Q1 of 2010 despite your busy schedules.

Let me start with a major earnings highlight for Q1 of 2010. The revenue for Q1 of 2010 rose 4.9% year on year to KRW 3.020 trillion. Considering the [unclear] building implemented since the beginning of March and the 28% reduction on sign-up fees since December last year, the year on year growth in the top line is especially meaningful.

Marketing expenses increased 28% year on year and 4.8% quarter on quarter. The main causes of the marketing expense hike during the first quarter were the rather overheated competition in the market as well as our focus on acquiring new subscribers to meet our 2010 annual revenue target. Although the marketing expenses edged up somewhat, it resulted in the growing number of subscribers with 530,000 new acquisitions during Q1 alone. In the process, the market share also expanded by 0.1% to 50.7% in Q1.

Despite the revenue growth, the operating income came down by 14.8% year on year to KRW 480 billion mainly due to the rising marketing expense amidst the heightened competition in the beginning of the year and the temporary increase in depreciation from the accounting change for the lease line network of SK Networks. On a quarter on quarter basis, however, the operating income was up by 8.4%.

The market is gradually stabilising in April. SKT will do its utmost to steer away from the heated competition in acquisition by focusing more on the commission structure for retention. In addition, we will be committed in complying with the marketing expense guideline of the Government to ensure effective reduction in marketing expenses as pursued by the Government. Accordingly, we expect higher operating income and EBITDA as well as improved earnings compared to the previous year starting from Q2.

The consumer participation culture is fast becoming one of the mega trends of our time. Against such backdrops, SK Telecom is pursuing the creation of an open eco system of handsets, networks and contents among others under the basic strategy of openness and sharing.

We consider the first quarter as a preparatory period for serious growth of the wireless internet market. From the second quarter on, we will continue leading the market while further solidifying our existing market leadership.

As of the end of April, the number of smartphone subscribers stood at 800,000 which positions SKT the highest compared to other competitors.

T Omnia II excelled in terms of ARPU as well. Excluding interconnection fees and sign-up fees the ARPU of T Omnia II subscribers stood at KRW 57,000 which is KRW 23,000 higher than the ARPU of KRW 34,000 for feature phone subscribers. Most notably, the data ARPU of T Omnia II was four times higher than that of the feature phones. SKT will continue to increase the ARPU going forward, leveraging the competitive edge into smartphones, networks and contents.

We plan to launch android phones in earnest from Q2 while expanding the number of smartphone line-up from the current 15 to 20. Including android phones, we will consider all the available options in our smartphone launching roadmap.

When it comes to the network strategy, we plan to commercialise HSPA Plus within the year while making the investments in the Wi-Fi network, also leveraging the WiBro network as the [backhaul] of Wi-Fi network. Since last March we started establishing a Wi-Fi network in the top priority areas with high customer needs. Initially we planned to roll out about 10,000 Wi-Fi hotspots. Offering eight services consisting of 5 million contents within the Wi-Fi zone will enable us to clearly differentiate ourselves against our competitors. With the additional engineering support, we will continue expanding the coverage in the future. As a result, the CapEx may be slightly higher than the annual guidance provided in the beginning of the year.

SK Telecom's T Store is an open marketplace with 680,000 registered subscribers, 36,000 contents and 5.6 million downloads as of March. Our target is to reach 10 million subscribers by 2013. We also have technologies necessary to develop contents such as e-Paper and augmented reality through which we could create further differentiated contents. In addition, we will maintain our leadership in the fixed and wireless internet markets by developing integrated fixed mobile business models while contributing to the growth of the wireless internet market by actively taking part in the domestic integrated app store initiative being discussed recently.

In terms of tariffs, we started offering per second billing for the benefit of the consumers while making efforts to launch price plans that allow the consumers stable wireless internet usage. We are currently considering the introduction of tethering a price plan and new price plans optimising the data and voice portions to better meet the customer's usage patterns. During Q3, we also plan to launch the one person multi-device price plan to accommodate the multi-device using behaviour.

Let me now comment on the progress of the IPE business. The IPE business is a cost effective business compared to the existing B2B model in that we leverage the existing infrastructures to create additional business models instead of simply selling networks or lease lines. Since we could create added value by imbedding additional solutions and applications, we could achieve both profitability and growth. The B2B revenue for Q1 marked KRW 165.8 billion, up 50% year on year. We will do our best to ride the current uptrends to achieve our annual guidance of KRW 1 trillion in revenue from B2B.

We are already applying new solutions in about 30 projects at home and abroad, among which domestic projects have been widely reported on. For example, we are collaborating with clients such as Posco and Korea Meteorological Administration (KMA) on the connected workforce service. We are also building a test bed for a connected workforce initiative within the SK Group so that we can replicate this prototype success in other industries as well. In addition, we are pursuing practical projects in diverse sectors such as connected finance and connected learning. Expanding beyond the borders, we are also working on partnerships in overseas markets such as Indonesia, Germany, Eastern Europe and China. We also expect cases where business models developed overseas can be brought into Korea as well.

Lastly, let me touch upon SK Telecom's global strategic direction. Under the overarching strategy of becoming a global ICT leader, SKT will continue making efforts to leap forward as a true global leader in not only the Korean market but also in the global market. In this context, SK Telecom is proactively embracing the paradigm changes such as global uptake in smartphones and wireless internet expansion while paying attention to the business areas we need to make inroads into in order to secure the IPE business related competitiveness. We will proactively pursue initiatives in both Korea and abroad if and when we deem it necessary to expand the wireless broadband market and to secure a stable infrastructure to support the globalisation of the IPE business model.

In our overseas business, we will maintain the start small, scale fast principle. More priority will be given to those businesses able to create cash flows. Through partnerships we will minimise investment burden and risks, remaining within the stable financial structure.

This concludes the opening remarks. Lastly, let me extend my deepest appreciation to all the investors and analysts for your unwavering interest and affection for SK Telecom. We will now begin the QA session. Please go ahead with your questions.

Now Q&A session will begin. The first question will be provided by Mr Sam Min from BPN Paribas. Please go ahead sir.

Hi, thank you for this opportunity. I basically have three questions on the marketing cap. First of all, I was wondering if you can provide your best estimate as to when KCC will be sort of implementing or releasing this marketing cap guideline. Secondly, if you can provide any details on the structure of the guideline. For example, will it be segmented by business lines? How closely will KCC monitor the marketing expenses, expenditures from operators? Will it be on a weekly basis or a monthly basis? Lastly, is there perhaps a chance that again this may not work out? In the past, government has tried to lower or ban subsidies without having it prevail so if you can give us some colour on why this time this marketing guideline will work, I would appreciate it. Thank you.

To answer your question regarding when and how the marketing expense [cap] guidelines will be implemented and in what fashion, it will be addressed by the executive in charge of the CR policy, Mr [Chung] and I will be following up with the Company perspective after his answer is given.

Before I hand over the microphone, I must mention that SK Telecom is fully committed to biding by this new guideline to be set forth by the Government and we will do everything in our power to abide by the guidelines in the future. But one caveat is that our competitors have to make sure that they collaborate with the rest of the parties to make this work. So we will be closely collaborating with the Government as well to enable an industry-wide effort to that end.

Good afternoon, my name is [unclear] from CR Strategy Team and I would like to address your question regarding the timing of the implementation of the marketing expense cap to be announced. Currently between KCC and all the carriers, we are in the last round of discussions regarding the finalisation of such guidelines. According to our best estimate, we believe that it could be concluded by the beginning of May. However, because there are some differing opinions between operators currently, it is difficult for us to give you an exact colour as to when it will be implemented.

You have mentioned earlier that the Government has attempted to implement various subsidy bans or reductions in the past and you mentioned that it pretty much did not really have full effectiveness so why we think that this time around the guideline will be effective was the gist of your question. As you recall, on 5th of March all the CEOs of the major telcos in Korea plus the KCC President got together and afterwards there was a series of announcements about the discussion made. One of the most differentiating points about this round of guideline development is the fact that there is a strong commitment, not only from the Government, but also from the CEOs of the telcos that we should implement this cap. For that reason, I believe that the implementation of this particular guideline will be effective indeed.

As to your third question regarding the specific contents of the marketing expense cap to be implemented in the future, well because we are currently in the middle of such discussions, it is too early to share with you more specific information about that. But earlier you mentioned you were curious about whether BU by BU type of monitoring will be implemented and what I could tell you regarding that point is that the marketing expense cap will be applied separately between the wired and wireless services at least. That we know for now.

The following question will be presented by Mr [unclear] Investment Securities. Please go ahead sir.

Yes, I have the following three questions. First of all, you have recently announced that you will be re-selling the products offered by SK Broadband going forward so the first question is what type of effect do you expect from the beginning of the re-selling of SK Broadband products by SK Telecom? If you have any subscriber acquisition target for this year regarding SK Broadband products, please share them with us. Also secondly, in the beginning of the year you offered us the revenue guideline or guidance for the entire year and so should we consider that figure to include this re-selling portion for SK Broadband? Thirdly, you mentioned that you would be launching many more number of smartphones during Q2 so what are the strong points about the new smartphones to be launched compared to iPhone?

Yes, I will first answer your questions regarding SK Broadband, what type of impact we anticipate, what our target numbers are for the subscribers and also whether this figure is included in the annual guidance. Also, the last question regarding the comparison with iPhone will be answered by the Head of the Sales Division.

Regarding the subscriber targets for SK Broadband re-selling business, yes of course we did come up with a figure in the beginning of the year for such activity. However, there will be an impact coming from the marketing expense cap to be implemented in the Korean market. Therefore, we are currently working with the refining of the numbers at the moment so once we come up with a more finalised figure, we will actively communicate them with you.

To answer your question, our annual guidance on revenue in the beginning of the year included the portion of re-selling for SK Broadband.

Yes, my name is Kim Sun Jun, in charge of the sales division. As you are aware, we are planning to launch about 10 different smartphones during the month of May and June this year, of which nine of them will be android phones. As you are well aware, the android phones are based the open [unclear] which pursues the openness of the network offering more choice for the users to choose from.

Not only with android phones but we are planning to employ various platforms within this smartphone category and we will be developing various differentiated services so we are confident that we will be quite competitive in the smartphone line up, even against the iPhone.

To elaborate, we have launched many new handsets in the past but never did I see the leader or the head of the sales division this confident about the line-up of phones that we will be launching this quarter.

The next question will be presented by Mr [unclear] from Nomura Securities. Please go ahead sir.

I have the following two questions. First of all, with the launching of the marketing expense cap guidelines to be introduced by the Government, there is talk that the Government will be inducing the operators to make more investments. So what type of investments do you think will be encouraged by the Government? Can you share with us the direction of the investment to be made going forward? Secondly, there is talk in the market about a possible spin-off of your subsidiary Eleventh Street. So I was wondering how that would impact your marketing expenses overall?

Currently to date we have not received any direct request from the Government regarding the size of the investment or the direction of the investment to be made.

Based on the annual guidance provided earlier in the beginning of the year regard CapEx, we will be beginning to execute such a CapEx investment. Initially, as we mentioned before, we will be making the necessary investments in facilitating the growth of the wireless internet market so that we could create the right ecosystem and we will be expanding the Wi-Fi network as well. So we will be beginning with such implementations initially.

Regarding the possible spin-off of Eleventh Street, we are making various reviews and considerations about various possibilities but nothing has been decided as of yet. For your information, this year's business plan is actually assuming that Eleventh Street will not be spun off within this year, that assumption under which we came up with various expense related assumptions.

The following question will be presented by Mr [unclear] from SK Security. Please go ahead sir.

I have three questions. Number one: there has been a rumour in the grapevine that you are possibly considering a sale of NATE Division and/or possibly confiding the operation of this business to another party perhaps. Could you verify about this rumour? The second question has to do with the Hana SK card business. After you made the equity participation in this business, we've seen a lot of advertisement in the media so far so could you give us the progress report about your venture with Hana Card? The third question is regarding your earlier comment with regards to the smartphone line-up, you will open all the possibilities in the future to come up with various line-ups. So does that mean that you will possibly consider the introduction of iPhone as well?

Let me begin by answering your question about the rumour about our selling the division of NATE. First of all, regarding the rumour, currently the Company has no plan at the moment to either spin off or to separately sell the division of NATE. But what I could tell you is that currently, when it comes to smartphone strategy, of course there is a big trend in the market to come up with more of the fixed line conversions, internet business models, as well as the OS assistance. Therefore, SKT will be working on various ways to come up with an integrated system of wired and wireless internet systems thereby developing more of the mobile internet related services and also creating a synergy between WAP and NATE.com and MobileWeb in various ways.

Next I would like to answer your question regarding the progress report on the Hana Card related equity participation and how things have evolved ever since. As you are well aware, the Hana SK Card was launched in earnest at the end of February this year and ever since then we have been launching various mobile oriented products such as Touch 7.

SKT is making the various implementations basically in two different directions. First of all, riding on the expansion or the spreading of the mobile card business model in the market, SK Telecom is coming out with various and interlinked business models with regards to e-commerce. During the months of March and April, we have completed the marketing strategies as well as marketing preparations in order to acquire more numbers of the mobile card customers. The full scale marketing activities will begin starting from the month of May.

Let me now touch upon your comment about the iPhone. SKT's basic strategy is to always keep an open strategy and open approach to better meet the customer needs and also to look at the business viability as well as the competitive landscape in providing various handset sign-ups. In that context, we believe that iPhone is one of the options available to us and of course that is one of our considerations when we look at the overall line-up.

The following question will be presented by Mr [unclear] from Merrill Lynch. Please go ahead sir.

Thank you for the opportunity. Just two quick questions. Number one: is marketing expense cap policy a regulation or just a mere guideline from the Government? In the event that you are to spend more than 22% or 20% of the total revenue on marketing, what will Government do? Number two: 9% shares in SK C&C, if you can just tell us what you guys are thinking given that shares have been up quite a bit recently. Thank you.

Your first question regarding the marketing expense cap policy, our head of CR policy will be answering that question and I will address your second question regarding the share of SK C&C.

We are supposed to sell the remaining shares of SK C&C at least by July 2nd of 2011 so from now until that period, we will be watching the market carefully so that we do not negatively impact the market in general while we could obtain the best price possible. So we would be making certain actions from now until then.

I'm in charge of the CR policy and let me answer your question regarding the marketing expense cap or guideline to be introduced. The Government will be introducing this guideline basically in two facets. In other words, first of all the Government will be giving out a guideline about the maximum ratio of sales to revenue expense and certain ratio will be given there. Secondly, the Government will be introducing some type of a maximum cap on the handset subsidy that we could provide.

Especially with regards to the second type of guideline to be introduced regarding the cap on the subsidy, we do not believe that we can look at it simply as a mere recommendation per se but rather we should perceive it as an enforceable type of a regulation of a kind.

Therefore, whenever there are infringements upon such guidelines or a violation of such guidelines, I believe that pursuant to the relevant laws and regulations, there will be definitely certain actions taken to address the issue.

The following question will be presented from Mr Jay Park, Samsung Investment Securities. Please go ahead sir.

I have the following three questions. First of all, with the introduction of the marketing expense cap, we anticipate your profitability going forward to improve and relatedly, I was wondering whether you have any plans to increase dividend in terms of DPS at the end of this year? Secondly, with the improvement of profitability, there is always talk about a possible tariff cut from some type of pressure. There has been a lot of talks in the town regarding a possible data tariff cut in the future so what is your thought on that right now and do you have plans to introduce some type of an unlimited data usage plan as well? Thirdly, it is has to do with iPhone and iPad. You mentioned earlier that you are pretty much open to any possibilities, including iPhone, and according to what we hear in the press, it seems like the biggest pain point or the negotiation point is some time of vendor subsidy to be offered. So if Apple refuses to provide any manufacturer or vendor subsidy, would you be still willing to introduce the iPhone 4G or iPad products going forward?

Let me first answer the first question regarding the shareholder return policy. We will be reviewing or revisiting the shareholder return policy after we see the earnings improvement process after we introduce the marketing expense cap in the second quarter of this year after we look at the overall estimate of the rest of the year.

I believe that regarding the tariff card issue, I believe that you were addressing the wireless internet site instead of the voice part of the business so basically SKT is currently reviewing and considering a possible price plan that we could reshuffle in the same tariff amount in that the users or subscribers could use more amount of data for the same amount of money. Therefore, once we launch such diverse types of price plans to allow more facilitation and then development of the wireless internet in the market, I believe that that will alleviate pressure on the tariff reduction portion.

Let me answer your third question regarding how we would react to the vendor subsidy issues regarding iPad and iPhone. Whenever we introduce a new handset line-up, we do not only simply look at the vendor or manufacturer side subsidy, we have to look at the acceptance on the part of the subscribers and other types of terms and conditions related to such sale. So only upon reviewing the comprehensive picture will we introduce a product.

The following question will be presented by Mr [unclear] from Citigroup. Please go ahead sir.

I have the following three sets of questions. First of all, regarding the Wi-Fi zone, you have mentioned that you will be rolling out in total about 10,000 Wi-Fi zones or hotspots and compared to your competitors in terms of the simple number of the hotspots, it seems like you are lagging behind the competitors. Is there any reason why we should not think that your Wi-Fi coverage is less than that of your competitors in terms of the hotspots? Also, do you think that 10,000 hotspots would be sufficient in dealing with the competition? The second question has to do with your margin from the IPE business. I'm wondering whether you have any internal hurdle rate or margin threshold when you win a project under the IPE division. Also thirdly, this is a rather technical question but if you look at the revenue breakdown that you provide to us, there is a line item called value added services and others in which you have a sub item that says lease line related revenue and likewise in the back of the distributed information, there is a separate ARPU calculation for valued added services and others. Does that also include the lease line revenue as well? If so, then what is the ARPU of the value added services if you exclude the ARPU of the lease line business?

Let me first answer your question regarding the 10,000 hotspots for Wi-Fi that we are planning to roll out for now and how that compares against a competitor. First of all, since last year we have conducted various analyses of the usage patterns or the usage related requirements from our customers throughout the nation and according to that analysis we have come up with the top priority areas to come up with the sites for the 10,000 hotspots.

When we say it's a hotspot or a zone, it is a concept of a site of a kind and each site might have a different scale or size in it as well. Therefore, simply looking at the number of the zones to make an accurate comparison would be a little bit of a stretch. However, our basic stance is that we will continue to roll out the Wi-Fi coverage so that we can sufficiently meet the needs of our subscribers while not lagging behind our competitors so that we could be on par with our competitors.

To answer your third question, yes, in that ARPU figure it also includes the lease line revenue related ARPU as well. Now let us address your question regarding from the IPE business.

Good afternoon, my name is [unclear], from the IPE division. You asked about the margin or the internal hurdle rate for IPE business. As you are well aware, this IPE business is in its fledging state and we are currently beginning various projects in various industries. As you can imagine, per industry we have a differentiated or different profit structure as well as the investment burden, therefore at this particular juncture it would be difficult for us to give you a flat answer regarding the margin hurdle rate of IPE business.

But what I could tell you is the following. Because in the IPE businesses, we would be leveraging existing telecommunications infrastructure that we have already invested in, therefore we would be simply adding extra value to the existing infrastructure. Therefore, compared to the current or the old way of B2B business, I believe that there is more opportunity to gain more margin from this new line of B2B compared to the past.

The following question will be presented by Mr Neil Anderson, HSBC. Please go ahead sir.

Good afternoon. I have three questions please. Firstly, also on the IPE business, could you give anymore colour on how the revenue -- you mentioned KRW 165 billion in the first quarter. Where is that allocated? How is it distributed between the voice, data, wireless, internet and so forth? Secondly, on the wireless internet revenue, it was down quarter on quarter because of a onetime effect of solution sales in the fourth quarter of 2009. If you strip out that one time effect, could you give us an idea of the percentage growth? Thirdly, what proportion of wireless internet revenues are now coming from flat rate data users? You've announced strong growth there so it would be good to get a feel for that. Thank you very much.

To answer your first question regarding the allocation into voice or wireless internet under the overall IPE revenue, it is quite difficult for us to give you that breakdown because when you enter into a contract in a B2B project, we usually give it as a lump sum and actually therefore we do not specifically break it down between different divisions of SKT services.

To answer your question regarding the exclusion of the one off effect from the solution sales under the wireless internet revenue, I think that the overall impact contributed by such one off factor in the overall reduction was mainly 60% coming from the UCT sales from the previous year which is a onetime solution sale and the remaining 40% reduction came from the number of reduced working days in those months.

With regards to the specific growth number, excluding such one off factor, we would have to get back to you through the [unclear] department because we don't have the specific number with us right now.

To answer your third question about the proportion coming from the flat rate subscribers out of the total wireless internet revenue, it is about 20%.

The following question will be presented by Mr John Keene, Morgan Stanley.

I have a two part question. First, regarding SKT's investment acquisition strategies, I recognise that you reiterated the management philosophy of starting small, scaling fast. For many investors, given SKT's track record with its past investments, I think it's your scale fast part that worries a lot of investors. So should you make any new investments down the road, what will be different about how you scale your investment going forward? Will there be some minimum criteria or milestones before you scale so that the market can actually see that the management has matured from those past experiences?

The second pertains to your handset. I believe there has been some criticisms regarding the terms for selling iPhones KT has agreed to with Apple which means KT is paying for all of the subsidies on iPhone. What insights can you share on terms you had to agree to secure the nine android handsets versus your knowledge of the terms that KT is using for iPhone? Given that you are actually releasing so many smartphones over the next couple of months, how might this effect your ability to keep your marketing costs under the cap? Thank you.

Let me first answer your question regarding our criteria and principles when making overseas investment. As you are well aware through our track record in making overseas investments, we have accumulated various experiences and there have been a series of lessons learned. It is precisely because of those lessons that we came up with the principle of starting small and scaling fast. Within the Company we have fully established a series of milestones, criteria and pre-requisites in order for us to fully comfortably enter into the scale fast mode. Therefore, all the future investment will be executed under the conditions that could ensure the highest probability of success.

Let me answer your question regarding the smartphones. Of course regarding the contract terms in sourcing any type of handset line-up, as with all mobile handset introductions of the past, we have to abide by the confidentiality agreement with regards to the detailed terms and conditions. However, what I could tell you is that our handsets we're sourcing, terms or I guess conditions going forward will not be that much different from our way of sourcing handsets in the past.

Of course, we will be able to manage the marketing expense cap on the new introduction of the [unclear] handset line-up that we would be introducing in Q2. We will be timing the launching period appropriately and we will conduct target marketing, etc so that we can meet the guideline cap.

The next question will be presented by Mr [unclear] from Morgan Stanley. Please go ahead sir.

I have two questions. Regarding the data ARPU for Q1, it currently stands at KRW 9,000 and it seems flat year on year as well. But at the same time, you mentioned that you currently have 800,000 smartphone users already and that their data ARPU tends to be four times that of the feature phones so we cannot quite reconcile such flatness year on year in terms of the data ARPU. Could you provide us with some more colour on that? The second question has to do with your T Omnia II and other smartphone line-up. How much average handset subsidy are you currently providing? You said that they are coming out with maybe 23,000 [unclear] and if you multiply that by actually 12 months then incremental revenue expansion could be as high as KRW 500,000 so how much [unclear] subscriber acquisition cost are you actually spending to actually achieve such a revenue impact?

To answer your first question, regarding the data ARPU, yes it is true that we currently have 800,000 subscribers with smartphones in our overall subscriber base, however, collectively they only account for 3% of the overall subscriber base. Therefore, despite the fact that the ARPU especially on the data side is much higher, the impact on the overall blended ARPU is quite minimal.

As you are well aware, our plan is to actually distribute over 2 million units of smartphones within this year, so accumulated it would mean about 2.5 million users using smartphones by the year end. Then I believe that we will be able to identify some meaningful change in terms of ARPU.

To answer your question regarding the handset subsidy, the subsidy defers by handset type and also depending on the period in which the subsidy is given. Therefore, we cannot provide you with a single number across the board for all the handset subsidies.

The following question will be presented by Mr James [unclear] from Security. Please go ahead sir.

Hi. Thank you for the opportunity to ask questions. I have one question regarding the IP and the B2B business. You've mentioned KRW 160 billion in B2B revenues in the quarter. You also mentioned 50% growth over last year. Does this include the lease line revenues that you have acquired from SK Networks?

Yes it does include the lease line related revenue in the B2B revenue.

Another follow-up question, sorry about that. How much lease line revenue did you record this quarter?

Well according to the current estimate, it is about KRW 27 billion that is included.

Thank you.

Thank you very much for staying with us until the very end of the conference call. As we mentioned earlier, during the first quarter SKT has come up with various preparations to lay the groundwork for more development in the wireless internet in the future.

In the future we will continue to do our utmost under the basic strategy of openness and sharing to continue to lead the market and to further enhance our competitiveness. We will do our very best to achieve actual and real performance end results so we ask for your continuous support and interest going forward. Thank you.

This concludes the conference call for the first quarter of 2010. Thank you.