SK Telecom Co Ltd (SKM) 2013 Q1 法說會逐字稿

(Interpreted) Good afternoon, welcome to the conference call for the fiscal year 2013 first quarter earnings results by SK Telecom. This conference will start with a presentation followed by a Q&A session. And now we will begin the conference of the fiscal year 2013 first-quarter earnings results by SK Telecom.

(Interpreted) Good afternoon, my name is [Young-Gyu Park], the IRO of SK Telecom. Today's conference call will consist of the earnings presentation by our CFO, Su Cheol Hwang, on the earnings results of Q1 in 2013 as well as future management plans and strategic direction followed by a Q&A session. To help deepen your understanding, we also have executives from the relevant business units with us.

The conference call will proceed with consecutive interpretation. And we remind you that all the forward-looking statements are subject to change depending upon the macroeconomic and market conditions.

With that, let me invite our CFO.

(Interpreted) Good afternoon, my name is Su Cheol Hwang, the CFO of SK Telecom. Let me first walk you through the consolidated financial results for the first quarter.

Revenue recorded KRW4,112.6b. The seasonal factors such as less number of working days led to a 2% reduction in top line quarter on quarter, but the climbing number of LTE subscribers together with the growing new businesses including B2B solutions business expanded the revenue by 3.6% year on year. We anticipate such upward trend of the topline to continue going forward.

Operating income marked KRW410.6b, coming down by 17.8% year on year due to the higher depreciation and amortization from the expanded investment and the temporary marketing expense hike during Q1. In the meantime, the EBITDA posted KRW1,092.6b, only edging down by 1.4% year on year.

Since mid-March, the market is maintaining a stable trend. We expect the stabilized market sentiment to continue into the latter part of the year through persistent efforts to change the competitive paradigm.

Net income came in at KRW345.9b, rising 15.2% year on year, supported by the business growth of the subsidiaries including the turn to profit by SK Hynix.

Let me now discuss the strategic direction and results by business. Today's telecom market is embarking on a true broadband based data era marked by the conversion from fixed line to mobile from voice to data and from one device to multi-devices, riding on the rapid proliferation of the LTE technology.

Such trend is expected to expedite the high growth of the data-centric telecom business. At the front of such changes, SK Telecom is ceaselessly striving for business structure transformation.

The subscriber number increased 24% compared to the previous quarter with 9.33m LTE subscribers. More recently, the number of our LTE subscribers surpassed 10m for the fourth time in the world, opening up an LTE era in earnest. SKT's year-end LTE subscriber number in 2013 is expected to reach 15m, far exceeding our original anticipation.

As a testament to our technological prowess, SKT was awarded the outstanding LTE contribution award in February at the world-renowned global mobile award at the World Mobile Congress.

Also, by commercializing the carrier aggregation technology capable of enhancing the maximum speed to 150 mega bps for the first time in the world, we have further strengthened our technology leadership in the LTE advanced era. The LTE advanced technology will usher in a high-speed mobile era, thereby bringing us closer to the true data era.

The recent change in price plan schemes led by SK Telecom is also accelerating the business structure conversion into a data-centric one. The introduction of the T&T sharing price plan is not only maximizing the value of voice calls by our subscribers but it is also leading the industry-wide transition into a data-centric price plan. Leveraging the smart network, we will also continue to discover new profit sources through innovative products and services such as full HD, 3D content and games payable across fixed and mobile network.

In terms of competition, SKT is shifting the competitive pillars in a groundbreaking manner by moving away from the existing competition for mere subscriber acquisition towards competitive dynamics focusing on conversion to data-centric business and new services. Our retention subsidy program for loyal customers with more than 80 months subscription introduced in February, in addition to the cancellation fees for early termination of contract, helped lay the foundation for subdued competition.

The data gift program introduced in February exceeded 1m usages in just 70 days upon launching being well-received by our customers for higher data utilization. By moving away from the cutthroat competition, SKT is being true to its commitment to strive for the highest customer value and retention based service paradigm shift.

The shift into a data business entails an across-the-board innovation in the telecommunications space comprising subscribers, networks, price plans, and products among others. Such transformation will not only bring about MNO-centric growth and profitability improvement, but also ensure growth of the overall ICT, industry in the mid to long term.

For SK Telecom, year 2013 will not only symbolize the innovation of our telecom business but also will be a pivotal year of reaping the fruit in our new business which is growing business in earnest. As we usher in the data era aside from the existing communications business, new growth from B2B, media, healthcare and platform is accelerating as well.

As for the B2B business, the revenue reached KRW386.3b during Q1, rising about 20% year on year. The top line of the solutions business marked KRW83b, jumping more than 70% year on year. The B2B solutions business is expected to grow by 90% year on year during the entire 2013 achieving KRW530b in revenue.

More specifically, My Shop 2.0 in the smart store solution, in addition to the mobile CDN in the Smart Cloud area, are creating success stories through continuous launching of new services.

In the case of the media, the IPTV business secured world's highest 600,000 mobile Pay TV subscribers supported by the exclusive broadcasting of the US Major League games and the launching of the high definition mobile TV. The fixed line subscribers also exceeded 1.5m enabling continuous upward trend. By 2015, we plan to acquire 7m IPTV subscribers in total, including the mobile IPTV subscribers.

As for the healthcare business, which is expected to become one of the key profit sources for SKT in the future, the health management service, smart hospital solution, and medical diagnostic devices have been selected as the three specific areas to focus on.

In March, the world's first personalized health management program interlinking the ICT technology with the medical services of the hospitals, called Health-On, was officially commercialized.

In April, the commercialized smart hospital solution was launched at Bundang Seoul National University General Hospital, further widening the business foundation.

SK Planet has been focusing its efforts on the digital content and integrated commerce as its anchor business areas. In February, SK Planet merged with SK M&C which specializes in the offline business and advertisement including OK Cash Back and LBS business, thereby further fortifying its competitive edge in the commerce area. Through the integration and realignment of the existing business infrastructures of the two companies, the combined entity will maximize synergy by establishing the big data analysis platform, developing a commerce model, interlinking both online and offline membership and rewards point systems and by offering advertisement services for the future.

Through such efforts, it will create a new commerce value leveraging the on and off line integrated platform.

The 11st which is at the heart of our commerce business, grew more than three times year on year. When including the mobile 11st results, the quarterly gross merchandise sales recorded KRW1.1 trillion and in the digital content area, the T store surpassed 20m subscriber number in April since its launch in September 2009. The subscribers for Key Map, Hop In and Smart Wallet also maintained a steady increasing trend on a quarter on quarter basis.

In the global market, the open market business, Numara Onbir, jointly purchased with a Turkish company, Dogus Holdings, since last year, was formally launched in March, leveraging the operational know how of the 11st. Through localized services, we are embarking on a full-fledged market entry.

Dear investors and analysts, 2013 is a critical year for both SKT and the telecom industry as a whole. SK Telecom will provide innovative offerings across the entire lifestyle of the customers while shifting the competitive paradigm to discourage the exhaustive competition. We will work hard to deliver visible results from our future growth engine such as B2B solutions, media, and healthcare among many. We will also ensure a lead forward by SK Planet, leveraging the merger with SK M&C.

I would like to extend my appreciation to all the investors and analysts for your unwavering support for SK Telecom.

Thank you.

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

(Interpreted) Now the Q&A session will begin. (Operator Instructions). The first question will be provided by Mr. Josh Bae from UBS, and the next question will be provided by Mr. [Yang Yong-In], from Hangul Investment Securities. Mr. Josh Bae, please go ahead with your question.

Yes, hi, thanks for the opportunity. I have two questions. First is regarding the competitive environment, it appears the increased competition led to the higher marketing cost in the first quarter. If you could share with us your observation regarding the competition levels in April and early May that you have seen so far. And also, what trends you expect going forward, that would be very helpful.

My second question is regarding the spectrum allocation, the regulator discussing allocating more spectrum to the wireless operators this year. So if you could share with us when you think the auction will be and any views you may have on the method, etc? Thank you.

(Interpreted) Let me first address the first part of your question regarding the competitive dynamics that we are witnessing at the moment. Typically speaking, every first half of the year, I believe that there has been relatively high level of competition in order to secure certain level of subscriber base by each telco in order to ensure annualized revenue target improvement.

And also, just seeing how the Galaxy S4 is about to be launched, I believe that there might be some guerilla type of marketing competition that is implemented by the telcos in order to eliminate their existing inventory of Galaxy S3 models as well. So there might be a slight possibility of temporary -- overheating competition in the market.

However, nonetheless, I believe that we are in an environment where we are not able to provide as high subsidies as in the past and also, seeing how the premium new handset lineup is actually proceeding right now, I don't think that we are at a point where we should be too concerned about too overheated market competition going forward.

Going forward, SK Telecom will work very hard to erode and actually subdue any unnecessary exhaustive competition that is centered around the subsidy payment and thereby focusing more on the more stellar call qualities and service quality enhancement and we will also work on further innovating our price plans and launching the diverse types of new products so that we can focus more on the fundamental competitive elements and towards retention of our existing customers. That will be the basic direction of our policy going forward in managing the market in the future.

In addition, I believe that as the share of the LTE subscribers out of the total subscriber number is actually exceeding 38% to 40% level, in the market as a whole, I believe that I guess the incentive for overheated competition in this category is further coming down.

And also seeing how the government is very committed to help stabilizing the market in terms of regulating the subsidies going forward of SKT as the dominant player in this particular category, we are quite committed to supporting the stabilization of the market as well. Therefore, going beyond the second quarter, I believe that it will be quite achievable to work towards the market stabilization.

Your second question had to do with the spectrum reallocation by the government and you asked about the approximate timing of the bidding process as well as the bidding methodology that we anticipate. I believe that the government is planning to finalize on their policies in this regard in the month of June and also go through the bidding price process around the August time period.

And as for the bidding or auctioning methodology itself, it is my understanding that the final decision has not been made to date.

And I believe that the spectrum allocation or frequency allocation will have imminent very big impact on the telco business in general so as the government has promised, it is our expectation and hope that the government will be giving a fair decision in this regard so that all telcos can benefit from their decision.

(Interpreted) The following question will be presented by Mr. Yang Yong-in from Hangul Investment Securities. And the next question will be presented by Mr. Yi Dong-Sub from SK Securities. Mr. Yang Yong-in, please go ahead with your question.

(Interpreted) I have the following two parts of the question. First of all, I believe that your company is announcing the launching of the On Net and Off Net unlimited calling price plan, and we are wondering what kind of profit and bottom-line impact this will have on your company.

And secondly, I believe that you have announced earlier that LTE Advanced technology will be commercialized starting from September so what will be the total CapEx size that is involved with this rollout and also, how will that impact your annual guidance on the CapEx amount.

And also regarding the multi-carrier and carrier aggregation technologies, what will be the coverage going forward?

(Interpreted) Let me first address your question regarding the recently announced On Net/Off Net unlimited calling price plan, and how that will impact our profitability going forward. SK Telecom, as you are well aware, is working very hard to shift away from the exhaustive marketing competition that is focused on the unproductive expenditures on the subsidy side towards the competition centering more on the fundamental service competitiveness.

And regarding the impact of the recently announced On Net/Off Net unlimited calling price plan that was announced, I believe that there have been a lot of discussions by outside observers as to how it could possibly negatively impact the company. But contrary to this belief, if you include all the extra benefit that the subscribers will be able to enjoy, and if you consider the ensuing positive benefits for the company, on a net-net-net basis, ultimately, we do not believe that we will experience a too significant impact on the revenue for SK Telecom.

Of course, regarding the voice overage related revenue, we do anticipate some reduction coming from the voice service category that we have enjoyed in the past. However, seeing how such voice [over] revenue has been already on a downward trend, I believe that the net impact on our bottom line will be quite minimal.

To answer the second part of the question, regarding our CapEx impact, as you are well aware, in order to facilitate the growing number of LTE subscribers and the growing traffic that we anticipate, we have already given you the CapEx guidance for the entire year in the amount of KRW2.1 trillion including the LTE investment.

And regarding the multicarrier devices that have been already implemented through the software upgrade process, I believe that either second half of the year, these devices will be able to provide the LTE advanced roll out in a commercial fashion already. Therefore, that extra investment that is necessary to transition or to migrate to LTE advanced will be quite limited as well.

And for your information, the multicarrier services that was opened and launched in July of 2012 has successfully rolled out by the end of 2012 not only cover the Seoul and Metropolitan area, but to all the major metropolitan cities around the country. So such expanded investment has been already implemented but in 2013, to keep abreast with the growing number of subscribers and traffic increase, we plan to further expand the coverage in mainly focusing on the high traffic concentrated areas.

So compared to those plans that are anticipated by the competitors, we do believe that the multicarrier/carrier aggregation coverage will be much wider in comparison.

(Interpreted) The next question will be presented by Mr. Yi Dong-Sub from SK Securities. And the following question will be presented by Mr. Kim Hue Jae from Daishin Securities. Mr. Yi Dong-Sub, please go ahead with your question.

(Interpreted) It all has to do with your subsidiary. First of all, as for SK Planet, it's been about two years since you spun off the company. So I was wondering whether you are seeing some crystallizing performance output from the short term to the long-term perspective and if you are showing any major gaps versus your [original] plan, what are such differences in actual performance?

And also, I believe that it would be appreciated if you could give us more detailed outlook about these businesses although you mentioned briefly in your opening remark how you believe that this subsidiary will proceed in the future per business.

And the second part of my first question has to do with your SK Communications as well as low end. I believe that you still have some equity-related issues to resolve. So how do you plan to address these issues going forward?

And my second question has to do with Hynix. I believe that internally, you must be going through some post-investment evaluation of your performance to date. So if you could elaborate on your financial/strategic performance that you believe that you have achieved through the acquisition of Hynix, that will be appreciated as well.

(Interpreted) The first part of the question had to do with the actual performance and outlook of SK Planet. As you are well aware, we had spun off this entity in Q4 of 2011 and until today, SK Planet has been focusing very much on growing its power and capabilities and presence in its respective business areas. And to be more specific, in terms of the 11st, I believe that it followed their very successful strategy of focusing on the very simplified settlement system called PayPin, and they've been focusing on the specialized marketing activities. So by doing so, they successfully countered the aggressive moves by the competitors.

And also, if you look at the Q1 2013 GMS or growth merchandise sales, it stood at KRW1.1 trillion. And for your information, last year the GMS number stood at KRW4.6 trillion.

And if I may share with you our perspectives on the mid to long-term perspective, we'd like to focus on, number one, the digital content platform which has very unlimited potential going forward, as well as the integrated commerce platform. And not only in the domestic market, our target is to grow as a major global platform operator going forward as well.

And as for SK Planet and SK M&C, I believe that they respectively have obtained online and offline B2B areas and mobile markets, B2C areasrelated capabilities. So they respectively have the relevant technologies and service capabilities and customer values as well. So by creating and combining these two entities, we believe that we could maximize the synergies effect. And we plan to further enhance the combined entities' competitive edge by focusing on the future platform based on the big CapEx. So under that premise, we have completed the merger between the two entities.

And the second part of your question -- which was the first question, had to do with our plans to resolve the issues with equity holdings of SK Planet as well as [Laurent]. As you are well aware, under the Korean Fair Trade Act, there are restricted acts imposed on the holding companies vis-a-vis their second-tier subsidiaries. And we have grace period up to two years to resolve these issues. And that grace period actually ends at the end of September this year. So currently we are poring over various issues or measures that we could opt for in order to address this issue. But to date nothing definite has been decided yet.

For your information, to answer your question which was regarding Hynix, as you are well aware, as of May 2, the closing stock price of Hynix stood at KRW29,450, which is an increase by 27.5% compared to the acquisition price. Considering our equity holding of SK Hynix, the difference -- or the gain since the acquisition in the valuation term stands at about KRW900b.

And I'm sure you know this already, but SK Hynix's net profit as of the end of Q1 was KRW178.7b and the number captured under the equity method gain for SK Hynix in the balance sheet of SK Telecom stands at KRW33.1b.

But I think we believe we should look beyond the simple financial gains that we are making through the acquisition of SK Hynix. If you look at it from the mid to long-term perspective, seeing how the LTE adoption will be further proliferating going forward, I believe that there will be a wider number of device lineups, diversity of lineups will be further developed, and the content-related needs will improve going forward as well. So in all those aspects, I believe that the possible synergy between SK Telecom and SK Hynix will only increase going forward as well.

(Interpreted). Your next questions will be presented by Mr. Kim Hue Jae from Daishin Securities. And the following questions will be presented by Mr. Stanley Yang from Nomura Securities. Mr. Kim Hue Jae, please go ahead with your question.

(Interpreted). Yes, I have the following questions. I believe that you still have about 4.8m 2G subscribers in your subscriber base. So how do you plan to actually manage the remaining 2G subscribers in the future? And also by launching your new marketing app called the Noot, I believe that you are trying to focus on the marketing efforts, focus more on the data consumption increase. So could you be more specific as to how you plan to further accelerate and expand the data consumption by your subscribers in the future?

And also relatedly, in this whole activities and initiatives, what will be the role taken up by SK Planet?

(Interpreted). To answer your first part of your question, you're right, as of the end of the second quarter -- or as of (inaudible) the number of 2G subscribers currently comes in at about 4.8m. And you're asking about how we plan to manage the 2G network going forward.

Our position is that rather than artificially and involuntarily suspending their services on the part of the subscribers, we will see the natural declining number of the 2G subscribers and we will react in a more natural fashion in this regard.

To answer the second part of your question, we have with us the head of the marketing strategy division who will help answer your question.

(Interpreted). Yes. My name is [Yoon Won-Young], the Head of the Marketing Strategy Division at SK Telecom. Recently, as you're well aware, we have launched the data creation application/initiative called Noot.

As you're well aware, we have to date launched other services called Data Sharing and Data Gift Program, etc. This new launching of the app Noot will -- has been initiated in order to further accelerate the usage of data by our subscribers.

We expect that these initiatives, including Data Sharing, Data Gift Program and the data creation program called Noot, I believe that we will be innovatively help expand the data usage by existing customer groups.

And also in order to facilitate the customer's lifestyle value change with regards to data, we have launched various other initiatives in the data category. If I may cite just a couple of examples, they include T premium services as well as T-based call service. And throughout the rest of this year, we plan to further launch new and additional products and initiatives to further meet the needs of customers' everyday lifestyle needs.

And seeing how we are in the process of shifting the price scheme into a more data-centric one, our plans to keep abreast with this change are as follows. Seeing how each subscriber has very diverse usage patterns of their data services and they have different behaviors, habits and preferred hours of the day that they utilize for data services. So we are fully aware of this. So we plan to further hone in onto the customer contextual marketing effort that is more customized and personalized going forward.

In addition, seeing how during the second half of this year we would be further upgrading our network with -- vis-a-vis the carrier aggregation network, we will be experiencing higher feed-in capacity. So in order to fully utilize that enhancement in our network, we are apparently coming out with various service initiatives together with SK Planet. But at the same time, by actually opening up such initiatives to the external parties such as OTT players in the market, we plan to further supplement any innovative services that actually come in the pipeline.

(Interpreted). The next questions will be presented by Mr. Stanley Yang from Nomura Securities. And the following questions will be presented by Mr. Choi Nam-gon from Dongyang Securities. Mr. Stanley Yang, please go ahead with your questions.

(Interpreted). I have the following two questions. First has to do with the ARPU. I believe that in the beginning of the year you have given us the guidance of ARPU growth for the entire 2013 to be at about 8% range. But if you look at the first quarter numbers only, it is less than anticipated and is coming in at about 3.4%. So going forward, do you believe that the ARPU growth rate will further accelerate so that you could fully meet the ARPU growth guidance of 8% after all?

And my second question has to do with your market share policy of maintaining above 50% level. Do you plan to continuously persist with this policy in the future? And of course we believe that your policy will stand as is. So if by any chance your market share is further threatened below 50%, how would SK Telecom counteract to address this issue? Would it be mainly due to either the tariff cut related initiatives or through other types of marketing subsidy increase? So my question is how specifically you plan to defend your market share.

(Interpreted). Let me first answer your question regarding ARPU. Actually if you look at the ARPU number for the first quarter, it actually stayed pretty much unchanged quarter on quarter and there are reasons that you are already aware of I believe where for instance there were some seasonal factors such as less number of working days which led to pretty much on par q-o-q movement in terms of the ARPU.

But if I may share with you the end of March ARPU figure, it has actually gone up by 2% compared to the previous quarter's average ARPU number. Therefore seeing how we are already seeing the uptick movement, meeting that 8% guidance that we had given you for the entire will not be an impossible target to meet.

We believe that the slope of ARPU increased growth rate in the beginning of the year has not been as steep as one would anticipate. However, we do anticipate very steady upward trend going forward in the ARPU numbers.

Let me now move on to your second part of the question as to how we plan to defend and maintain the market share of above 50%. I believe that -- I guess protecting our current market share will be quite meaningful in that the market share becomes the source and the foundation for future profit for the Company.

Our plan is basically to leverage our excellent service quality as well as differentiated network quality that we have as a competitive edge in order to further retain our retention of our existing subscribers, that is our basic policy.

And for your information, it is not our ultimate goal to actually exceed that market share number of 50%. That is not the end-goal. But rather we believe that if we continue to maintain our differentiated competitive edge in our network and service capabilities, as a natural outcome, the market share will follow.

(Interpreted). Your next questions will be presented by Mr. Choi Nam-gon from Dongyang Securities. And the following questions will be presented by Mr. Sam Min from Morgan Stanley. Mr. Choi Nam-gon, please go ahead with your question.

(Interpreted). Yes. I have just one question regarding your dividend policy. I believe that for this year you are anticipating a rapid growth of your bottom line. And I believe that the Company management is quite confident about such earnings improvement. As you are well aware, you have maintained a fixed dividend per share at the amount of KRW9,400 since year 2007. I was wondering whether you have any plans that you are either considering or planning as to a possible conversion to the payout ratio scheme or a payout of a special dividend.

(Interpreted). I believe that SKT to date has been quite consistent in maintaining the balance between stable shareholder return and the growth of the Company. Going forward, I believe that that basic sense will not be changing.

I believe that we have already shared with you our policies or plans for dividend policy for year 2013. But looking at the long-term perspective, I cannot tell you that we have come up with the final and concluded the direction as to how we plan to proceed with the shareholder return policies going forward. But I could assure you that under the aforementioned policies that I have described, I believe that our shareholder return policy will be maintaining the same philosophy in the future as well.

(Interpreted). The next questions will be presented by Mr. Sam Min from Morgan Stanley. And the following questions will be presented by Mr. Dan Kwon from Deutsche Securities Korea. Mr. Sam Min, please go ahead with your questions.

Yes, hi. Thank you for this opportunity. (Spoken in Korean). I just wanted to ask you in regards to your performance in the first quarter and the market expectations in terms of fundamental improvement for this year given how well your stock price has performed of late, if you could perhaps reiterate how you feel about some of the guidance that you provided and perhaps if you can set some financial guidance now that you feel marketing expense is likely to ease, perhaps if you can provide any type of profit guidance either for the second quarter or for the entire year, that will be very helpful.

My second question is on the dividend question previously, and with your debt to equity ratio now down from last year, we're looking at CapEx, capital expenditures, to fall, marketing expense to fall as well, and ARPU to rise. And so what do you plan on doing with the cash this year? Thank you.

(Interpreted). Let me first address your question regarding our performance of the first quarter and how we foresee the outlook going forward. During the first quarter, as you are well aware, compared to our original plan, we have experienced quite a bit of an overheated market situation. So our performance has not been as robust. However, as we go into the period beyond the second quarter, as you have mentioned it yourself, I believe that the market outlook or the market consensus seems to be more favorable.

As for the 2013 operating income related information, as the market is estimating, I believe that because of the cost reduction factor, especially surrounding the potential drop in the marketing expenses, on a year-on-year basis I believe that the operating income will be improving.

However, concerning the uncertainties in the management environment that we are currently facing, it would be quite challenging for us to share with you more specific financial guidance for the rest of the year in terms of the earnings.

To reiterate, for the entire 2013, we believe that on a year-on-year basis we will see a meaningful improvement and that's our expectation, and also the Company is working towards that goal. We do hope and expect that possible free cash flow increase will be likely, thanks to the CapEx decrease as well as the marketing cost savings.

As to such extra cash that we will be generating from all those targeted factors, the Company will be looking at the way to utilize this fund in a more comprehensive manner, comprising not only the improvement of the financial structure of the Company but also a stable shareholder return as well.

(Interpreted). The next questions will be presented by Mr. Dan Kwon from Deutsche Securities Korea. And the following questions will be presented by Mr. Joon Lee from Merrill Lynch. Mr. Dan Kwon, please go ahead with your questions.

(Interpreted). Yes, I have the following two questions. It's been about a month since you have launched the unlimited calling price plans that you have recently introduced. So I was wondering whether you could give us a breakdown of the number of subscribers per different price line categories. If that's not available right now, can you at least provide the average billing ARPU from this particular price plan because you said that it is a little higher than the existing ARPU? And relatedly, are your upselling and down-selling activities performing as well as expected?

And those -- my second question has to do with your CapEx plan. Your CapEx number which was guided was KRW2.1 trillion. I just want to double-check, does that include the frequency allocation related bidding price as well?

(Interpreted). Let me first answer your question regarding the usage pattern of the recent launch -- recently launched unlimited calling price plan, namely, T&T Sharing price plan. It's been a month as you have mentioned. And as of the end of April figure, the number of subscribers opting for this price plan stood at about 1.2m subscribers.

If I may share with you the pattern that we have so far witnessed among those subscribers asking for the T&T Sharing price plan, majority of the plan subscribers are not only utilizing the on-net or off-net unlimited calling options, but at the same time there are opting to maintain their existing level of data usage capacity.

While there are some subscribers that are opting for the downgrade of the price plans from their existing ones, the majority are actually either maintaining the current level of the price plan that they have used to date or some are actually upselling. So in other words, they're upgrading in terms of the pipeline.

For your information, the majority of the subscribers opting for this new price plan are deciding on the usage of the KRW65,000 price plan and above.

I hope -- I ask for your understanding since I do not have the detailed breakdown numbers with me right now as for the specific number of subscribers per different categories of the price plans. So I apologize for that.

To answer your second part of the question, you asked whether our KRW2.1 trillion CapEx guidance number includes the possible payout for the frequency allocation related auctioning process. You could understand that these two items are quite separate, CapEx versus the frequency bidding price will be separately handled.

For your information, if I may refer back to the historical experience, whenever new frequencies are allocated to a telco, in the first year we are usually asked to contribute about one-quarter of that amount, and the rest of the amount is to be paid out in a smoothed-out fashion throughout the spectrum usage period.

(Interpreted). The last questions will be presented by Mr. Joon Lee from Merrill Lynch. Mr. Joon Lee, please go ahead with your questions.

Hi. Thank you for the opportunity. I just have one simple question. The SK Group announced a few days ago that they'll convert 5,800 temporary contracts to permanent contracts. What financial impact you think this move will have on SKT going forward? Thank you.

(Interpreted). At the Group level, the announcement specified that a certain number of non-regular workers will be converted into regular workers that is. But if we may share with you a financial perspective on this conversion only, I think that the financial impact will be quite minimal.

Rather by converting such non-regular workers to regular workers, I believe that we could anticipate higher productivity coming from the stability of their job security. So I believe that if you consider all those positive aspects as well, the financial impact will not be that big.

Thank you.

(Interpreted). If there are no further questions, we will now close the conference call by inviting our CFO for his closing remarks.

(Interpreted). Thank you for taking part in today's conference call until the very end. We will make sure that all your questions and interests are reflected in our efforts to further improve our management.

As mentioned before, SK Telecom will continue to reinforce its competitiveness by rising to new challenges while doing its utmost to ensure consistent growth and shareholder value increase.

Thank you very much.

(Interpreted). This concludes the earnings call for Q1 2013. Thank you very much for taking part.

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.