SK Telecom Co., Ltd. Sponsored ADR Aktie

[Interpreted] Good morning and good evening. Thank you all for joining the conference call for the SK Telecom earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on SK Telecom's Third Quarter of Fiscal Year 2026 Earnings Results.

[Interpreted] Good afternoon. I am Tae Hee Kim, IRO of SK Telecom. Let us begin the earnings conference call for the third quarter of 2026. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors such as market and management situations. Let me now present our CFO.

[Interpreted] Good afternoon. This is Jong-seok Park, CFO of SK Telecom. SK Telecom has announced that in 2026, it would strive to strengthen fundamental competitiveness of the telecom business focused on customer value and restore financial performance and dividend levels based on the success of its AI business achieved through a strategy of focus and prioritization.

This year, driven by efforts to restore customers' trust and improve business fundamentals to achieve qualitative growth, our telecom business has been delivering tangible results with improvements in both subscriber growth and profitability. For AI business, we have refined our growth strategy and execution framework with a focus on AI data centers and have been accelerating our efforts to move the business forward. Following the establishment of SK Hyper in July, we announced a plan to establish SK Horizon in August to strengthen operational expertise of our existing data center and submarine cable business and secure funds for business expansion. Since then, we have successfully secured external investments.

Building on the progress we have made toward recovery and the business foundation we have built this year, we will strive to ensure that these changes lead to a recovery in our annual performance.

Let me now report on the consolidated financial performance for the third quarter. Consolidated revenue posted KRW 4,497.3 billion, up 3.2% Q-on-Q and 13.1% year-over-year, driven by mobile service revenue growth. With the third quarter consolidated operating income of KRW 552.3 billion, we have posted operating income of over KRW 500 billion for 3 consecutive quarters.

With a cumulative consolidated operating income of KRW 1,655.9 billion for the first 3 quarters this year, we are continuing the trend of earnings recovery that we promised at the beginning of the year, thanks to our ongoing efforts to improve profitability.

Next is shareholder return. EPS for the third quarter is KRW 831. We will do our utmost to maintain stable shareholder returns based on a stable profitability base.

Let me now present business highlights by business line. Mobile service revenue has been gradually recovering through efficient market operations centered on subscriber recovery and customer lifetime value. On the back of the launch of flagship handsets such as Galaxy Fold and iPhone, mobile service revenue saw a Q-o-Q growth driven by high-quality handset subscriber acquisition.

As a result of the efforts to enhance our core competitiveness through customer-friendly products and services, we ranked first in the mobile communication service category in the Korean Customer Satisfaction Index last September. Following this year's National Customer Satisfaction Index and the Korean Standard Service Quality Index for the first time in 2 years, we have once again topped all 3 of Korea's major customer satisfaction surveys. We will continue to ensure that these efforts and changes translate into improvement in competitiveness and profitability of our telecom business.

Next is AI business. For AIDC business, we have streamlined the execution framework for the AI infrastructure business by establishing the 2 companies mentioned earlier, one in charge of the operations and expansion of the current AI infrastructure and the other in charge of AIDC business development. With this governance restructuring, SK Telecom will oversee the overall strategy, risk management and global collaboration for the AIDC business, while the 2 new companies will develop expertise and decision-making systems tailored to their respective business characteristics, thereby accelerating the pace of execution.

Based on the operational capability of the current data centers, SK Horizon is pursuing a plan to build new data centers in Ulsan and Seoul with a target capacity of approximately 180 megawatts. We also plan to expand the submarine cable business in phases. The E2A submarine cable project that we are involved in is targeting the launch of commercial services in 2029.

For SK Hyper, we're currently discussing concrete terms with potential tenants for AI data centers primarily in the Ulsan area. We plan to secure customer demand quickly and build an AI data center on the prepared site. We will share more details with the market as soon as they become available.

For the AI service business, we continue to build connections among models, infrastructure and the customer base. The scope of application for our proprietary AI foundation model is being expanded to include A dot and workplace AI services. We aim to establish Korea's largest AI service ecosystem by combining our telecom and AI capability through the participation in the Everyone's AI project.

As AI technology advances and its range of applications expands, the relationship between telecommunications and AI is becoming even closer. Against this backdrop, we aim to implement a single growth strategy for both telecom business competitiveness and AI business development.

We will apply AI technology to strengthen telecom services tailored to customers and improve network operation while utilizing our telecom customer base and network capabilities to expand the adoption of AI services across everyday life and industries. We will develop AI infrastructure not only as a foundation for AI technology, but also as a key growth driver in the medium and long run. We will ensure that these achievements we have made in our telecom and AI domains will lead to bigger growth. We ask for the continued support and interest of our investors and analysts. Thank you.

[Interpreted] [Operator Instructions] We would now like to begin the Q&A session. The first question will be provided by Seung Woong Lee from Yuanta Securities.

[Interpreted] I'm Seung Woong from Yuanta Securities. I would like to ask 2 questions regarding the newly established companies for AIDC business development.

First of all, I'd like to get some updates on SK Hyper. You mentioned during the second quarter earnings call that you will try to secure customer demand first before making specific investments. So I'd like to get some updates on your customer acquisition-related situations as well as discussions with financial investors. If there are any concrete details you can provide us, I would appreciate it. And I would also like to understand if there's any time line or any schedules or targets for these types of activities.

My second question is related to the SK Horizon, which will be established early next year. I'd like to understand the reason behind your decision to establish another company, SK Horizon. And what will be the roles between SK Hyper and SK Horizon in pursuing your data center business?

[Interpreted] Thank you for your questions. First, I'd like to comment on your question on the recent updates on business development for SK Hyper. Since established in July, SK Hyper has secured sites and have been actively carrying out business development activities to attract customers.

More specifically, we obtained construction permits for certain capacity in Ulsan and are currently discussing concrete business terms with 3 to 4 global companies. On multiple candidate sites other than Ulsan, we're developing business, including securing land and power and attracting customers. As consultations with potential tenants are ongoing, we will not be able to disclose any details on contract volumes or schedules, but we aim to secure enough customer demand for initial operation by the first half of next year, obtain permits and build the data center in order to open the data center in phases starting from the second half of 2029.

AIDC business requires a massive amount of investment. So it is essential to secure stable demand through long-term contracts to be able to obtain external funding. So while we are discussing contract terms with potential customers, we're also considering various financing options at the same time, including project financing and funding through strategic and/or financial investors.

Next, I'd like to comment on the different roles to be played by SK Horizon and SK Hyper. Since SK Hyper and SK Horizon have different business stages, there was a necessity to establish execution systems tailored to the characteristics of each business.

SK Horizon handles the data center business in the capital area, construction of 100-megawatt capacity in Ulsan and expansion of submarine cable business. So it already has certain commercial contracts and financing structure already in place. So we concluded that it would be better for us to maintain a majority stake in SK Horizon to maintain business stability.

In developing gigawatt-scale AIDC business, SK Hyper needs to secure commercial contracts, seek large-scale investment funding and take other necessary steps. Therefore, there was a need to have a different framework to allow more flexibility in the process of business development and execution.

So likewise, we will continue to employ appropriate business structures to strengthen execution capability, manage financial burdens and expand our AIDC business in stages.

[Interpreted] The following question will be presented by Jungchan Kim from Korea Investment & Securities.

[Interpreted] I'm Jungchan Kim From Korea Investment & Securities.

I have 2 questions. First of all, about your MNO business. Even though the number of handset subscribers declined in the third quarter, your mobile service revenue has increased on a quarter-over-quarter basis. So I'd like to understand the driver behind the MNO revenue growth and get some color on the future outlook going forward. My second question has to do with low earth orbit satellite communications. And recently, in the U.S., SpaceX has acquired bandwidth as well as acquiring base stations. And such low earth orbit satellite operators may have some impact on SK Telecom as well as the domestic MNO market. So what is your view on the potential impact of such operations?

[Interpreted] Thank you very much for your questions. I will first address your question on the impact of satellite communication service on our business as well as the domestic MNO market. And I will hand over to the executive in charge of MNO support to get more information about the MNO business status.

Currently, in Korea, low earth orbit satellite communications are primarily used in areas where existing terrestrial networks have limited coverage, such as those for aviation and maritime operations. To be able to compete with mobile network operators in the B2C mobile service market, significant investment is needed to secure additional bandwidth to handle higher data traffic and build ground infrastructure for in-building coverage.

Currently, the domestic operators already have excellent network quality and service competitiveness based on nationwide 5G coverage and high levels of in-building coverage. So the impact of satellite-based services on the domestic MNO market is expected to be quite limited.

Nevertheless, satellite service operators may further improve their coverage and data processing capacity by combining satellite and ground networks. So we will continue to monitor future technology development, business models and changes in the domestic regulations. Now I will hand over to Bai Byeong Chan in charge of MNO network to answer your first question.

[Interpreted] I'm Bai Byeong Chan, in charge of MNO network service. Starting from early this year, we have been focusing on acquiring high-quality subscribers through customer value innovation and restoring fundamental competitiveness through qualitative growth rather than engaging in competition to acquire subscribers through excessive marketing. In the third quarter, using flagship handset launches as a momentum, we continue to improve subscriber base quality by attracting high LTV subscribers and target new segments such as foreigners to expand the subscriber base. As a result, both the mobile service revenue and ARPU have been growing.

We will maintain this growth strategy in the fourth quarter as well. And if we continue to enhance customer value and fundamental competitiveness, MNO revenue is expected to continue to recover.

[Interpreted] The following question will be presented by Hoi Jae Kim from Daishin Securities.

[Interpreted] I'm Kim Hoi Jae from Daishin Securities. I would like to ask you 2 questions. First of all, about your shareholder return policy. Your current shareholder return policy is until 2026, and it includes the shareholder return of more than 50% of the consolidated adjusted operating income. And you earlier mentioned that there will be treasury share cancellation as well as dividend payouts. But recently, only dividends have been paid without treasury share cancellation or any other actions.

So I'd like to understand what your future shareholder return policy would look like, whether it will include more than 50% of return to shareholders, whether it will include treasury share cancellation or whether it would include a minimum DPS guarantee. And I would also like to understand if you decide to sell your stake in Anthropic after the IPO, I wonder if this proceeds will be used for shareholder return or will be used for investment?

My second question is on your mobile business. Everyone is paying attention to your AIDC business, but I believe that fundamental telecom business is critical for SK Telecom. So I'd like to get some updates on SKT's efforts regarding 5G SA, 5G and 6G.

[Interpreted] Thank you for your questions. I will answer your question on our future shareholder return policy. And regarding MNO technology development, I will hand over to Mr. Lee Jong-Hoon in charge of SK strategy to answer your question.

Our basic shareholder return policy and direction is to maintain minimum the current level of dividend by strengthening competitiveness and profitability of our telecom business and based on stable profit and cash flow. What we are thinking about in terms of future shareholder return policy is the amount of investment that is needed to build a basis for growth, including AI data center development. In order to build gigawatt scale data centers, a lot of investments are needed. And it is our position that we will try to reduce our own direct investment burden by actively utilizing external funding, including financial investors.

However, even though we actively utilize external investments, we still need to execute some CapEx for AIDC development. So compared to the past periods where there was no need for new data center development in the future, we may need to execute some level of investment. Therefore, we will continue to consider and review the necessary size of investments for different businesses and their execution schedules as well as our financing structures to make sure that we will have enough investment efficiency and financial soundness.

As for our next shareholder return policy, we have just started the process of reviewing the future plan. And after discussing this with the Board members and after making necessary revisions, we will be able to make an announcement. The timing of the announcement is not fixed yet, but as late as before the first quarter of 2027, DPS is determined.

As for our decision to sell our stake in Anthropic, we are going to make this decision in consideration of various factors, such as the possibility of creating synergy between Anthropic and SK Telecom, market conditions and necessary funds for growth investment. As for the usage of disposal proceeds, we're going to take into consideration various factors, including medium- to long-term investment plans for AI data center, the actual funding requirements as well as the financial situations in a way that we'll be able to maximize shareholder value going forward.

Now I will hand over to Mr. Lee Jong-hoon, in charge of network strategy to comment on any updates on network development.

[Interpreted] I'm Lee Jong-hoon, in charge of network strategy. Let me first comment on 5G SA. 5G SA is a technology standard that uses 5G network alone, and we have already completed relevant technology optimization and commercial network verification, and we're planning to commercialize this in December 2026. 5G advanced refers to sophisticated technology where software upgrade is made to the existing 5G equipment and network. Currently, we're in the process of conducting study and validation of the relevant technology and relevant elements, and we will consider future customer and service demand as well as technology ecosystem to introduce this in phases.

The technology standardization for 6G is targeted for 2029 and commercial launch of 6G is expected to happen after 2030. We're actively participating in 6G technology research and development as well as standardization, and we're monitoring major technology and global trends. And going forward, we will consider standardization status and technology maturity as well as market conditions before we decide to launch 6G commercially.

[Interpreted] We will take the final question. The last question will be presented by Joonsop Kim from KB Securities.

[Interpreted] I'm Kim Joonsop from KB Securities. I would like to ask 2 questions. The first question is on your -- the growth gear strategy that was mentioned in early October. And the second question is related to SK Hyper. Now for the first question, the growth gear strategy that was mentioned in the media in early October was about combining customer touch points and AI infrastructure. It was quite impressive. If you start to implement this growth gear strategy in full swing, I'd like to understand what areas will be monetized first for SK Telecom, whether it would be business AI services or AI infrastructure utilization or telecom subscriber-based services. So which area will be monetized first?

My second question is regarding SK Hyper, which was established in July. Compared to July, the current interest rate environment is quite different. We have higher interest rates and the external environment continue to change. So this may lead to more challenges in attracting investments. So I'd like to understand SK Telecom's strategy in responding to these current situations.

[Interpreted] Thank you for your questions. I'm CFO. Let me comment first on our growth gear strategy.

We're currently working on and refining details regarding the growth gear strategy, but the big picture is to connect telecommunications and AI services and infrastructure with one growth framework so that we can position ourselves in the AI token economy. SK Telecom has more than 23 million subscribers and the transaction and payment systems as well as the platforms and infrastructure that can offer different AI models.

So based on these capabilities, we are working on a Token Gateway business that will manage customers' AI usages and connect different models and infrastructure for different purposes. You asked about which area will be monetized first. Already telecom and AI infrastructure have the basic business models in place. And for AI infrastructure with rising utilizations of data centers, we are expecting rapid growth. As for enterprise AI services, it may take some more time before we can produce tangible results.

But given our full stack AI capabilities, including our network competitiveness and the infrastructure and agents, I believe there is huge potential. We believe that opportunities will open up first in the public sector and national defense, and we aim to create a structure where monetization happens through AI usage and operation based on the Token Gateway. We're also reviewing ways to connect telecommunications products with subscriber base, and we will make all the necessary preparations to be able to deliver tangible results.

Next, I'd like to comment on the changing environment surrounding SK Hyper.

We plan to utilize actively external funding for AIDC construction and business expansion. So it is true that interest rates affect funding costs, but what matters more in securing investment is project bankability.

As for SK Horizon, we were able to receive large external investments after we secured business stability and profitability based on long-term contracts.

So under the principle of seeking investment after securing customer demand, if we develop enough business visibility through competitive contracts, we believe we can secure necessary investments despite market uncertainties such as interest rate trends.

And we will continue to monitor the funding situations in the capital market and focus on developing attractive bankable businesses based on customer demand. Thank you.

[Interpreted] This concludes the earnings conference call for the third quarter of 2026. If you need further explanations or have additional questions, please contact IR at any time. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning, and good evening. Thank you all for joining the conference call for the SK Telecom earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions]. Now we will begin the presentation on SK Telecom's First Quarter of Fiscal Year 2026 Earnings results.

[Interpreted] Good afternoon. I am Tae Hee Kim, IRO of SK Telecom. I'd first like to ask for your kind understanding that the earnings call started later than scheduled. Let us now begin the earnings conference call for the first quarter of 2026. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors such as market and management situations. Let me now present our CFO.

[Interpreted] Good afternoon. This is Jong-seok Park, CFO of SK Telecom. At the beginning of this year, we said that we would focus on strengthening fundamental business competitiveness centered on customer value and restore profitability through sophisticated AI business in 2026. The first quarter was a significant period in which this direction began to translate into actual results. Thanks to [indiscernible] efforts to regain our customers' trust, the company recorded a net subscriber add this quarter and the fundamentals of our core telecom business are rapidly returning to normal. The performance of the AI business is gradually improving as a result of business restructuring based on a strategy of focus and prioritization.

As these changes led to actual results, we were able to post earnings similar to the levels prior to the cybersecurity incident. With business performance returning to normal, the company has decided to resume dividend payments starting this quarter. Dividend per share for the first quarter is KRW 831 (sic) [ 830 ]. We are pleased that we were able to deliver on the promises that we made during the last earnings call. We will make every effort to restore the dividend level by normalizing earnings on a full year basis through continuous improvement of the telecom business fundamentals and creation of additional results from the AI business.

Let me now report on the financial results for Q1. Consolidated revenue posted KRW 4.39 trillion, up 1.5% Q-on-Q on the back of MNO revenue growth driven by subscriber growth and the growth trend of the data center business. We posted KRW 537.6 billion in consolidated operating income. Our quarterly operating income exceeded more than KRW 500 billion, which is attributable to extensive efforts to regain customers' trust and company-wide initiatives to improve productivity.

Let me now present business highlights by business line. MNO achieved a handset subscriber net add of approximately 210,000 in the first quarter, which is a substantive outcome of diverse measures taken to innovate customer value and restore customers' trust. Yet we are not complacent, but remain committed to further strengthening business fundamentals and competitiveness with customer-friendly products and services. We have expanded customer benefits and usability by restructuring the membership program, and we're currently overhauling price plans to offer more choices to customers.

The fixed-line business is also producing stable results, thanks to continued subscriber net adds, an increase in the share of subscribers signing up for higher price plans, including Giga price plan and a stronger subscriber retention trend. We will do our utmost to achieve the dual objectives of subscriber recovery and profitability enhancement through constant change and execution based on the philosophy that customers are the essence of our business. In the AI business, the effects of the strategy of focus and prioritization are gradually becoming visible. AI data center revenue is maintaining a growth trend year-over-year, driven by Pangyo Data Center and higher utilization of Gasan Data Center. The construction of Ulsan AI Data Center is underway, and we plan to pursue additional scale-up by building new data centers in areas, including Seoul.

New opportunities are emerging for our AI data center business due to the surge in demand for AI data centers from global tech companies. Based on business experience and differentiated competitiveness across the entire value chain of AI data centers, we will actively pursue partnerships with global players and keep expanding our AI infrastructure business. Within AI B2C business, the agent business is evolving in a direction that creates synergy with the telecom business and enhances fundamental competitiveness. We plan to improve ADAS performance by linking it with our proprietary AI foundation model to strengthen its own competitiveness.

With the increase in AI adoption, the B2B market is undergoing structural change driven by AI transformation and new AI-based markets are taking shape. SK Telecom will secure leadership in the rapidly evolving market by utilizing full stack AI capabilities across infrastructure, models and agents and mobilizing the customer base and execution capabilities secured from our B2B business. We ask for the continued support and interest of our investors and analysts as we overcome the crisis and continue driving change and embracing challenges to achieve greater growth. Thank you.

[Interpreted] [Operator Instructions] The first question will be provided by Seung Woong Lee from Yuanta Securities.

[Interpreted] I'm Seung Woong Lee from Yuanta Securities. I have 2 questions. First of all, as you mentioned during your earnings presentation, the company started quarterly dividend payment starting from Q1. And I'd like to understand the overall shareholder return plan and the size of the shareholder return for the entire year of 2026. Secondly, I can see that the company was able to produce earnings results that are similar to the levels prior to the cybersecurity incident. Is it safe to understand that this type of trend will become a new normal? And I'd like to get some guidance from the company on the full year basis earnings outlook.

[Interpreted] First of all, thank you for your questions. I'd like to comment on the question on our annual earnings outlook, and then I'll move on to addressing your second question on shareholder returns. First, on our annual earnings outlook. In the first quarter, our operating profit posted KRW 537.6 billion, and the trend has reversed from the downward trend after the cybersecurity incident and shown an upward trend to be approaching the pre-incident levels. Our goal is to improve the full year earnings further from the current levels.

For our telecom business, thanks to our efforts to restore customers' trust, which is our #1 priority in 2026, we achieved a net addition to handset subscribers in Q1, contributing to the recovery of the bottom line as well as the top line. For our AI business, we are reviewing and implementing various measures to improve the structural profitability by pursuing pivoting and discontinuation of low-margin businesses through the strategy of focus and prioritization. In addition, data center business is seeing a meaningful growth trend and the B2B business has revised its strategy to focus on AI full-spec capabilities. And we believe that these businesses will drive revenue and contribute to bottom line improvements for the remainder of the year.

And finally, we are working to improve productivity in terms of business operations and processes through enterprise-wide AI tool adoption and AX transformation of call centers, and these measures are having a positive impact on cost efficiency improvement. So in short, we will do our utmost to recover the annual [indiscernible] to be higher than the pre-incident levels through profitability recovery of the telecom business, expansion of growth businesses centered on AI data centers and continuous productivity enhancement.

Now I'd like to speak about shareholder returns for 2026. As was announced earlier, we resumed quarterly dividend payments with the DPS for the first quarter of KRW 831 (sic) [ 830 ]. I'd like to thank our shareholders very much for their kind understanding and patience. As earnings continue to recover this year, we plan to conduct dividend payments as stably as possible. As for the size of the dividends for the whole year, when concrete full year earnings become more materialized, the Board of Directors will have discussions and make decisions in consideration of business performance and financial structure. I won't be able to share with you any specific number at this point, but I promise that we will do our utmost to restore the dividend levels to the previous levels.

At the Annual General Meeting of Shareholders in March, the company transferred capital reserves of KRW 1.7 trillion to retained earnings to allow tax-exempt dividends, which is expected to deliver substantive benefits to shareholders. And for your reference, according to relevant law, tax-exempt dividends are possible from the 2026 year-end dividends.

[Interpreted] The following question will be presented by Joonsop Kim from KB Securities.

[Interpreted] I'm Joonsop Kim from KB Securities. I have 2 questions, one on MNO marketing, the other on AI DC. You have produced a recovery trend in terms of the net subscriber adds as well as market share. So I'd like to understand the overall subscriber market share target for SK Telecom and the marketing direction and how you're planning to strike a balance between profitability and marketing. Secondly, you reported that the AI DC revenue in the first quarter has increased by 89% year-over-year. And I'd like to understand how this AI DC business is making meaningful contribution to your profitability. If you can give us some color, I would appreciate it.

[Interpreted] Thank you for your questions. I'd like to address your question on our AI DC business, and I will hand over to [indiscernible] in charge of MNO support, who will answer your question on our MNO subscriber targets. First, let me comment on the time line as to when AI DC business will be able to make meaningful earnings contribution. First of all, I'd like to remind you that we only announced the AI DC revenue numbers, and we do not disclose any other indicators, including profitability-related indicators. We're aware that the market is interested in knowing this, but please understand that we are doing so in consideration of various factors, including the domestic data center market situations.

Nevertheless, what I can say is that the AI DC business is comparable to the existing telecom business in terms of profitability, and there's much room for the AI DC business to become even more profitable going forward. Since AI DC is our key growth business, we will think of what we can share to help investors better understand our AI DC business performance. Now I'd like to turn to [indiscernible] in charge of MNO support to answer your question on our MNO subscriber targets.

[Interpreted] I'd like to comment on our MNO subscriber target. The New Year 2026 started with the number of handset subscribers reduced by around 986,000 year-over-year. Reflecting on our performance in the first quarter, we were able to achieve a net add in subscribers on the back of changes in the competitive landscape, back-to-school marketing to attract new subscribers and S26 flagship handset marketing. As a result, we were able to achieve a net addition to our handset subscribers of 208,000.

Throughout the year, we will continue to make efforts to recover subscribers by targeting new segments, including foreigners and strengthening competitiveness in terms of products, services and sales channels. When we continue to strengthen fundamental competitiveness through business operation focused on profitability, we believe that the subscriber base and the market share will naturally grow. And based on this approach, we will avoid engaging in excessive spending competition aimed solely at increasing subscriber numbers, but rather focus on market operation on securing high-LTV subscribers.

[Interpreted] The following question will be presented by Aram Kim from Shinhan Securities.

[Interpreted] I'm Aram Kim from Shinhan Securities. I'd like to ask you 2 questions. First of all, telecom's equipment providers, both in Korea as well as abroad are focusing on developing AI-RAN, which is about using telecommunications network infrastructure for AI functions such as inference. So I'd like to get SK Telecom's view on AI-RAN. And secondly, there is an increasing demand and growth for AI traffic. And I'd like to understand what this increase in AI traffic, what kind of business opportunities will this bring to SK Telecom as a telco?

[Interpreted] Thank you for your questions. On your questions on AI-RAN as well as business opportunities brought by AI traffic, [indiscernible] in charge of Network Strategy will address them.

[Interpreted] I'm [indiscernible] in charge of Network Strategy. I'd like to first talk about expected benefits and commercialization plans of AI-RAN. AI-RAN is evolving in 2 domains. One is to improve telecommunications network infrastructure using AI and the other is to use wireless network infrastructure as a platform to provide AI services. So in the first domain, we expect to be able to automate base station operations through AI-based failure prediction, optimization of traffic and resources and power efficiency improvement. This will lead to higher efficiency and improved customer experience. As for the second domain, we may be able to create new business opportunities and generate profit from the provision of AI services such as inference and media processing by utilizing AI computing resources at the base stations.

We are actively participating in technology research and standardization together with global players and manufacturers such as Samsung, DOCOMO and NVIDIA for the evolution of AI-RAN. However, AI-RAN is still in an early stage, so we will consider the adoption of AI-RAN by comprehensively considering various aspects such as technology maturity, standardization, validation on commercial networks and other aspects. We will continue to maintain technology leadership in the next-generation network technology areas, including AI-RAN and use the technology leadership to proactively secure new business opportunities.

Next, I'd like to make some comments on AI traffic. While there is a significant increase in AI traffic, the share of AI traffic in the entire traffic is still not very high. However, we're considering ways to make AI traffic increase with a connection with AI-RAN and how to distribute traffic across the networks. So we will continue to look into technology to be able to do so.

[Interpreted] There are no questions in the queue right now.

[Interpreted] This concludes the earnings conference call for 2026 first quarter of SK Telecom. If you need further explanations or have additional questions, please contact IR at any time. Thank you.

[Portions of this transcript that are marked

[Interpreted] were spoken by an interpreter present on the live call.]

Good afternoon. I am Tae-hee Kim, IRO of SK Telecom. Let us begin the earnings conference call for fiscal year 2025. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session.

Please note that all forward-looking statements are subject to change depending on various factors, such as market and management situations.

Let me now present our CFO.

Good afternoon. This is Jong-seok Park, CFO of SK Telecom. It is my first time to greet to investors and shareholders as CFO. I wish you a happy new year, and I also wish all of you good health and happiness in the new year.

In 2025, SK Telecom put priority on expanding operational improvements across the company and monetizing AI business and made strenuous efforts to strengthen fundamental business competitiveness and secure a foundation for new growth drivers.

However, the cybersecurity incident and its subsequent developments also led us to a period of careful reflection, realizing that understanding and innovating on customer value, which is the essence of our business, is a prerequisite for a sustainable future. We will do our utmost to build SK Telecom with strong fundamentals grounded in the trust of our customers.

Let me now report on the financial results for fiscal year 2025. Consolidated revenue posted KRW 17.099.2 trillion, down 4.7% year-on-year due to sales of subsidiaries, net decline in subscribers following the cybersecurity incident and implementation of the Accountability and Commitment Program, including tariff discounts.

Operating income reported KRW 1.073.2 trillion, down 41.1% year-over-year, on the back of the decline in revenue, costs related to the cybersecurity incident, including USIM replacements, and costs incurred during business restructuring at the end of 2025. Net income came in at KRW 375.1 billion, down 73% year-over-year, mainly due to penalty payments arising from the cybersecurity incident.

Let me report on shareholder return. The financial impact of the cybersecurity incident persisted into the fourth quarter and substantial costs were incurred in the process of business portfolio restructuring. As a result, the company decided not to pay out quarterly dividend for the fourth quarter.

Accordingly, the Board of Directors resolved to set the DPS for fiscal year 2025 at KRW 1,660 including the quarterly dividends already paid, which will be finalized after being approved at the Annual General Shareholders Meeting in March. We will strive to restore our financial performance to return to previous dividend payout levels.

Next, let me report on the current status and future directions of our telecom business and AI business. In 2025, our MNO business focused on addressing changes to the business environment caused by the cybersecurity incident. In 2026, with our priority on customer value innovation, we will strive to adhere to fundamental principles and standards in all areas, including quality, safety and security and to fully regain our customers' trust.

We aim to improve our products and channels and achieve operational optimization centered on customer lifetime value to regain fundamental business competitiveness and become the #1 service provider from the customer's perspective. Through this, we will also ensure that our financial performance recovers to previous levels.

For AI business, we focused on solidifying a foundation for new growth in 2025. Starting this year, we plan to concentrate on areas where we excel to achieve tangible results.

In 2025, AIDC revenue continued a 2-digit growth trend, thanks to the increase in utilization rates of Gasan and Yangju data centers and the acquisition of Pangyo data center. Also, construction of Ulsan AIDC has been underway since September last year. This year, we aim to accelerate growth by actively developing business expansion opportunities through business scale up with an additional data center in the Seoul metropolitan region.

We plan to create new possibilities through in-house development and external partnerships for the AIDC solution business, which was launched to create synergies with AIDC business. Also, we will scale up the undersea cable business initiated in 2025.

Furthermore, we aim to enhance efficiency and productivity of AI agent business and B2B AI business to produce meaningful outcomes. We plan to secure preferential opportunities to participate in various projects through our own AI Foundation Model Project, which is in its second phase.

SK Telecom is determined to improve MNO's business fundamentals by strengthening core competitiveness in all business areas centered on customer value and to restore profitability by producing AI business results driven by AI data centers.

We ask for the continued support and interest of our investors and analysts as we work to turn this crisis into an opportunity to restore our customers' trust. Thank you.

Now we would like to begin the Q&A session.

[Operator Instructions] The first question will be provided by Jae-min Ahn from NH Investment & Securities.

I'm Ahn Jae-min from NH Investment & Securities. I can see that we now have new CFO, COO as well as IRO. So there are new members to the management. And I believe that the market has high expectations upon this change. And so congratulations to all of you, and I hope that there will be good results coming from this management this year.

I'd like to ask you two questions. The first question is that we would like to get some color on our dividend policy for 2026. Last year, due to some sluggish business performance, the size of the dividend payout to shareholders was reduced. So what can we expect in terms of dividend payout for 2026 as well as the possibility of earnings normalization?

And my second question has to do with the overall strategic directions and priorities for the new management this coming year.

Thank you for your questions. First, I'd like to answer your question on this year's earnings outlook as well as dividend payout direction.

First of all, to comment on 2025 earnings performance, I understand that many people would like to know whether we can return to the pre-cybersecurity incident earnings levels. Due to sales of certain noncore subsidiaries and decline in MNO subscribers, revenue did not recover to the 2024 levels. However, in terms of operating income, we aim to return to the 2024 level as much as possible by improving profitability of the telecom business and improving self-sustainability of the AI business.

We will utilize AI across the telecom business, including marketing and network, to boost productivity and improve profitability. Also, we plan to focus on striking a balance between cost and benefit when it comes to subscriber acquisition. For AI business, we plan to continue to focus on areas where we can make meaningful earnings contribution. In particular, we will pursue meaningful expansion of data center business to create new revenue streams and improve profitability through economies of scale.

Now let me comment on the dividend payout outlook in connection to earnings expectation. First of all, we sincerely apologize to our shareholders for not being able to pay the yearly and year-end dividend in the fourth quarter following the third quarter. The cybersecurity incident has had direct financial impact and one-off costs were incurred in the process of restructuring our business portfolio and organization in 2025. Please understand that we had to reduce the size of the annual dividend payout for these reasons.

Our number one priority in 2026 is to restore earnings through the measures that I mentioned earlier, and we will do our best to return the previous dividend payout levels. We will also consider other measures to increase shareholder value such as tax-free dividend to restore the trust of our shareholders and investors and to ensure that SK Telecom is a company that people want to invest in. More details will be discussed at the Board in consideration of business performance, financial positions and funds for growth investments to achieve a balance in overall capital allocation.

Now I'd like to comment on the key strategic priorities for the new management. So our priority for this year is to strengthen practical and substantial competitiveness in both telecom and AI business. And for this, we plan to pursue three main strategic directions: first of all, restore market leadership through customer value innovation. We will place priority on customer value, which is the essence of our business, based on which we are currently redesigning all elements of our telecom business including products, memberships and channels to offer real value that customers want. We will share more details in the future.

Second, we will innovate business productivity through A.X acceleration. We will apply AI in all areas including marketing, network and customer touch points to improve customer experience and boost productivity. We will advance AI-based lifetime value modeling to provide personalized offerings and to use AI to automate network operations including design, construction and operation.

Third, we will enhance sustainability of our AI business by focusing on our core strengths. We will pivot according to changing business environment to focus on areas where we excel and improve profitability through cost structure improvement. AI data centers are already a strong growth driver for SK Telecom. We will quickly build the Ulsan AIDC and plan to add another data center in the Seoul region to scale up the AIDC business and create new business models to offer diverse solutions related to AIDCs.

So to sum up, we will focus on strengthening core business competitiveness in all business areas centered on customer value and demonstrate how SK Telecom will make another leap forward.

The following question will be presented by Tae-hyun Kim from IBK Investment & Securities.

I am Kim Tae-hyun from IBK Investment & Securities. I would like to ask two questions. First of all, there's a lot of interest in the market about the value of the equity stake that you have in Anthropic. And I would also like to understand whether you're planning to liquidate your equity stake going forward.

The second question has to do with your proprietary foundational model project. What is the strength that SK Telecom has in this regard? And what are some of the potential business opportunities we can expect going forward?

Thank you for your questions. I'd like to answer the first question on our equity stake in Anthropic. And then the Head of AI Strategy Planning will address your second question on our own foundation model project.

First, let me comment on the current status and future plans regarding our equity stake in Anthropic. First of all, please understand that we cannot disclose accurate details on shareholding ratio and value at the time of change due to confidentiality clauses in the contract. However, our invested assets are regularly revalued and reflected in the business report. So the 2025 business report to be disclosed very soon will have updates on our equity stake.

We understand that the market is quite interested in a possible equity disposal or equity valuation, but please understand that no decisions have been made in this regard, and there's nothing that we can share at this point in time about the possibility of using it as part of funds for dividend.

Now I'd like to hand over to the Head of AI Strategy Planning to comment on the second question.

I'm Choi Dong-hee, Head of AI Strategy Planning. Let me answer your question on our competitiveness in the foundation model and business opportunities. The A.X K1 that SK Telecom is developing together with the consortium members is Korea's first hyperscale AI model with more than 500 billion parameters. This model is recognized as possessing differentiated competitiveness as it can provide high-quality responses in consideration of cultural context because it is developed using the largest Korean data set.

We expect that A.X K1 will create a lot of business opportunities for both B2C and B2B business. For B2C, we plan to add the model to A., which has more than 10 million users, to ensure that a large number of customers can access the model. We also plan to add references through Liner, a member of the consortium.

For B2B, we plan to add this model to A. Biz for work productivity enhancement and provide a model to our manufacturing affiliates, such as SK hynix and SK Innovation, to strengthen their competitiveness. Within the consortium, we plan to expand the use of the model to vertical services such as KRAFTON.

We will continue to develop this hyperscale model in a cost-effective manner with government support. If we are selected as 1 of the top 2 at the end of 2026, we expect that we can secure preferential opportunities to participate in various projects, such as national B2C projects to maximize benefits of AI, AX projects to enhance industrial competitiveness and productivity and projects to upgrade systems and services in the public sector.

The following question will be presented by Hoi-jae Kim from Daishin Securities.

I'm Kim Hoi-jae from Daishin Securities. I'd like to ask you two questions regarding your MNO business. Due to the waivering of cancellation fee recently by your competitor, I can see that there was some impact on your business results. For instance, LG U+ has demonstrated that they have seen an increase in their MNO subscriber base as well as MNO revenue in 2025, thanks to this development.

So I'd like to understand to what extent you benefited from this trend for SK Telecom as well. And I'd also like to understand your subscriber target for 2026 as well as MNO revenue outlook.

My second question is that you have now new members in the MNO management as well as the company management. So what will be the key areas that you will focus on in your MNO business in 2026?

Thank you for your questions. Regarding your two questions on the MNO business, I'd like to turn over to our Head of MNO Support.

I am Bai Byeong-chan, Head of MNO Support. Let me address your questions on the impact of KT's cancellation fee waivers as well as our win-back target for 2026.

With the cancellation fee waivers by our competitor, the carrier switching market expanded temporarily in the beginning of the year. However, since then, we are seeing an overall market stabilization trend. A large share of customers who joined SK Telecom during that period were voluntary win-back customers who returned after having switched to another carrier last year following the cybersecurity incident.

We believe that the customer appreciation package that includes substantial benefits such as subscription tenure, restoration and membership benefits as well as diverse measures to strengthen our security has been effective in restoring the trust of our customers.

Going forward, we will not rely on disruptive marketing competition for short-term gains, but rather focus on strengthening core business competitiveness through customer value innovation to continue to expand our customer base. So to this end, we are currently working on restructuring our product offerings and market operations. And as soon as they are ready and become available, we will share more concrete directions and results with the market and our subscribers.

Now let me comment on our MNO revenue outlook for 2026 and strategies to recover our subscriber base. We have started the new year under rather challenging circumstances due to the year-over-year decline in handset subscribers. And throughout 2026, we will strive to minimize revenue impact by winning back subscribers and implement various measures to create growth by developing new customer segments.

However, despite these measures that we have in plan, with the prolonged impact of customer attrition, it is challenging to bring revenue back to the pre-cybersecurity incident level. So for MNO business this year, we plan to focus on boosting profitability. We will reorganize our products and channels to cater to customer preferences and improve cost efficiency through optimized operations based on customer lifetime value.

In addition, we will use AI to further improve our operations including products, marketing and network operation and create a productivity-based business structure to enhance customer value and maximize performance relative to input. So through these efforts in 2026, we aim to restore the profitability of the MNO business and build a structural foundation for medium and long-term growth.

There are no questions in the queue right now.

With no further questions, we would like to conclude the earnings conference call for 2025 for SK Telecom. If there are additional inquiries or questions, please feel free to contact IR. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, and good evening. Thank you all for joining the conference call for the SK Telecom earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on SK Telecom's Third Quarter of Fiscal Year 2025 Earnings Results.

Good morning. I am Chung Hee-Jun, IRO of SK Telecom. Let us begin the earnings conference call for Q3 of 2025. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors such as market and management situation. Let me now present our CFO.

Good morning. This is Kim Yang-Seob, CFO of SK Telecom. The third quarter of 2025 was the period where we renew our mobile business by implementing the accountability and commitment program to overcome the cybersecurity incident and reassess company-wide AI capabilities, thereby renew our goals and determination for the future. In this quarter, the accountability and commitment program has had a significant financial impact. The consolidated revenue posted KRW 3,978.1 billion, 12.2% decline year-on-year. The M&A revenue fell by approximately KRW 547.7 billion year-on-year due to 50% tariff discount in August for all customers with the customer appreciation package and series of team membership discounts.

The significant sales decline led to 90.9% year-on-year drop in operating income to KRW 48.4 billion. The net income turned negative due to the penalties from the cybersecurity incident. Given the unprecedented deterioration in the financial performance, the company inevitably decided not to declare dividends for the third quarter. While the financial impact of the incident continues to weigh on the results, we are fully committed to restoring stability and resuming dividend payments going forward.

Now let me report on business updates. The fixed and mobile business are showing gradual recovery from the cybersecurity incident. The number of 5G subscribers increased by approximately 240,000 Q-on-Q to 17.26 million, and broadband and IPTV subscribers also recorded positive net additions. As part of our mobile business innovation, the company recently launched Air, a digital communication service exclusively for unlock device. Designed with an emphasis on simplicity and practicality based upon in-depth analysis of the needs of the customers in their 20s and 30s, this service is expected to play a key role in broadening our mobile customer base.

The AI business is bringing together previously distributed AI capabilities under one structure. Functions and organizations, including AI DC, A dot B for enterprises, A dot service for B2C and global AI partnerships and investment and AI R&D are being reorganized into the AI CIC, establishing a more cohesive and efficient business structure. Revenue from the AI business achieved a 35.7% year-on-year increase in revenue, further expanding the foundation for achieving its mid- to long-term goals. Driven by the acquisition of the Pangyo data center and the award of the GPU leasing support program, AI DC revenue posted KRW 149.8 billion, up 53.8% year-on-year.

The company continues to expand the scale and profitability of its data center operations. The Ulsan AI data center poised to be a key driver of data center revenue growth, held its groundbreaking ceremony in late August and is now under full construction. In addition, the company recently signed a memorandum of understanding with OpenAI to jointly build an AI data center dedicated for OpenAI in Korea's Southwest region, positioning itself to capture new opportunities in the rapidly evolving AI infrastructure market.

Revenue posted KRW 55.7 billion, up 3.1% year-on-year. Officially launched in late June, AIX an AI agent designed for enterprise use, has received positive initial feedback as workplace AI tools that helps employees focus more on their core tasks. In this quarter, the service was rolled out to about 10 SK Group affiliates, including the company and is planned to be expanded to a total of 25 affiliates by the end of this year.

Through its latest upgrade this quarter, A. has integrated cutting-edge ALM such as AX 4.0 and GPT5 while introducing a new AI message feature that alerts users to potential spam or phishing text. In addition, with its recent integration into T Map in September, A. is now accessible to a broader base of users, allowing more people to experience the service firsthand.

Building on its long-standing expertise in LLM, the SK Telecom Consortium was selected in August as a core team for the proprietary AI foundation model project led by the Ministry of Science and ICT. Through the project, the company aims to further strengthen its AI competitiveness, pursue new business opportunities, and contribute to the development of sovereign AI. The past 6 months have been the most challenging period for SK Telecom since its founding. The entire organization has been fully mobilized to respond to the cybersecurity incident. While it served as an opportunity to emerge as a stronger and more secure company, it also led to the loss of many customers and continued financial impact.

To move beyond this crisis toward recovery and renewed growth, the company has set a clear goal of driving continuous innovation in information security. We will strengthen execution across key areas such as increased security investment, adoption of next-generation technologies, and enhancement of the external verification system. In the telecom business, we will place customer trust restoration at the highest priority and focus on reinforcing our core competitiveness to reclaim our position as Korea's leading telecom company. At the same time, in the AI business, we will focus on delivering tangible results.

SK Telecom is determined to turn this crisis into an opportunity for renewed growth and to emerge as a stronger, more resilient company. We sincerely ask for the warm encouragement and continued support of our investors and analysts as we embark on this new beginning. Thank you. Now we'll begin the Q&A.

[Operator Instructions] The first question will be provided by Jae-min Ahn, from NH Investment & Securities.

I have 2 questions. The first question is about dividends. During the presentation, you said that you will not declare the dividend for the third quarter, which is regrettable. And I'd like to hear about your focus on the fourth quarter dividend. And it might be a bit too early to discuss about the 2026 dividend policy. Can you give us a heads up as to whether the dividend of 2026 will return to the level of '24? The second question is about the performance. The third quarter's poor performance is something to be expected. And I'd like to ask you about the fourth quarter outlook because the free offering of the 50-gigabyte data and the discount are still ongoing. So, there could be the potential for the tariff down selling. So, I would like to hear about your 4Q performance outlook.

Thank you for this question. I'd like to respond to your second question first, the impact of the incident on the third quarter performance. The financial impact from the cybersecurity incident in Q3 was mostly reflected on the revenue side. Mobile revenue declined about KRW 500 billion Q-on-Q, nearly all attributable to the incident. The largest factor was the 50% discount on August tariffs offered to all customers as part of the customer appreciation package, while enhanced membership benefits also contributed to the revenue decline.

On the cost side, KRW 134.8 billion of fines imposed by the Personal Information Protection Commission was recognized as a non-operating expense in Q3. As the customer appreciation package, such as additional data and the membership benefits, will continue through the year-end. So, some decline in mobile revenue is expected to persist in Q4, but the impact should be significantly smaller than in Q3. That said, Q4 typically involves concentrated spending activities, so a cautious approach is warranted regarding operating profit.

While it is too early to provide detailed guidance for fiscal year '26 before finalizing management plans, the company aims to drive a steady recovery in mobile revenue through restored customer trust while maximizing cost efficiency to return to pre-incident operating profit levels. The company's AI business, including AI DC, continues to show solid growth momentum, which is expected to contribute to a turnaround in overall performance. Further details on FY '26 guidance will be provided once management plans are finalized. Thank you.

So let me respond to the question about dividends for the whole year FY'25 and FY'26. As mentioned earlier, following a resolution by the Board, the company has decided not to declare a dividend for the third quarter. This was an unavoidable decision, taking into account the financial impact of the cybersecurity incident, cash flow condition, and overall financial stability. We ask for your kind understanding.

As for the Q4 dividend, it is difficult to make any definitive statement at this time, but the Board will review the matter once the full-year performance and cash flow are finalized, taking into consideration the company's growth investment capacity, financial structure, and overall capital allocation balance. As the impact of the cybersecurity incident will be mostly reflected in 2025, the operations are expected to normalize from 2026, and all the operational improvement measures will be fully implemented. And we will make every effort to restore the dividend to the pre-incident level in line with improved performance.

The following question will be presented by Heejin Lim from Citi Securities.

I have 2 questions. First, is that this is the first earnings call after the incident and the implementation of the rectification measures. So, the question is that how much of the customers that you have lost in the previous quarter, you have regained in this quarter? And what are your plans to win back this customer? And I'd like to learn about your marketing plans. The second question is about the Air that was mentioned during the earlier presentation. So, it seems that the Air is a smart service that is offered at an affordable price range. So, I'd like to understand its implications on the top line and ARPU.

Thank you for this question. And this question will be answered by the marketing strategy team.

After the contract cancellation fee waiver period ended on July 14, the company focused on rebuilding customer trust to reverse the market trend. Through these efforts, the customer churn was successfully contained in August and September, resulting in a net neutral balance between additions and losses. Going forward, rather than focusing on numerical recovery of the customer churn, which could overheat the market, the company plans to pursue qualitative recovery centered on strengthening fundamental competitiveness and improving customer and revenue quality. Through granular customer analytics, we provide optimized products, subscription methods, rate plans, and value-added services tailored to customer needs across different distribution channels. The recently launched air service is a prime example designed to meet diverse customer demand. The company will continue to enhance customer satisfaction by offering segment-optimized products and services while strengthening its overall competitiveness in the market.

So let me respond to your second question about Air. On October 13, the company officially launched Air, a digital communication service exclusively for unlocked devices. AI represents SK Telecom's new initiative to respond to the shift in mobile usage patterns among customers in their 20s and 30s towards SIM-only and fully digital experiences. It allows customers to complete all service procedures directly through the app without visiting offline stores.

The service offers 6 simple rate plans focused on the most commonly used data tiers. While it does not support teamwork, team membership, fixed mobile bundles, or family discounts, it provides only the essential features at more affordable prices. While existing pay service cater to customers seeking a wide range of benefits such as family bundle discounts or device subsidies, Air is designed for unlocked device users who value digital convenience and practical benefits. Through the launch of Air, the company expects to meet the needs of wider customer base and broaden its marketing reach. By offering a new telecom service for unlocked device users, Air is expected to gradually expand the overall wireless subscriber base and continue to top-line growth. In terms of its price, it will be in the same range as the chief direct plan, so its impact on ARPU will be minimal.

The following question will be presented by Sohyun Park from UBS.

Two questions I have. The first question is about the Ulsan DC, this is something that you are working together with AWS and understand that the groundbreaking ceremony was held sometime at the end of August. So, I'd like to understand the progress of the Ulsan AI DC project. And when do you foresee the completion of this construction and the beginning of the operation? And if you have any additional plans to add other data center facility, please do share? The second question is about A. service. You have recently surpassed the 10 million subscriber landmark and now was able to secure a quite sizable user base. So, I'd like to understand if you have any plan to actually charge the service.

So thank you for this question. First question will be answered by the AI DC development team. And the second question will be answered by the AI growth strategy team.

So let me respond to you about the progress of the Ulsan AI DC project. Construction of the Ulsan AI data center began on September 1 and is progressing smoothly according to the plan. The revenue from the Ulsan AI data center will follow a ramp-up structure and increasing in proportion to the utilization. The profit generation is expected from '27 and expected to grow steadily thereafter. The Ulsan AI data center will also serve as a key reference case marking SK Telecom's successful attraction of global big tech partners to Korea and will act as an important catalyst for future expansion of the company's AI data center business. In addition, the company is in active discussions with global investment firms and other major technology companies considering AI data center projects in Korea and across the broader APAC region, exploring various form of collaboration.

Next, I'd like to discuss our data center expansion plan. As mentioned in the previous earnings call, the company aims to achieve KRW 1 trillion level revenue by operating a cumulative 300 megawatts or more of data center capacity by 2030. To this end, we are currently pursuing the construction of an additional AI data center in Korea Seoul, and the design work has just begun. Given that this location represents the last valuable site in Seoul with secured power capacity for data center development, it offers ample land to accommodate large-scale facilities. We anticipate a strong demand for the project. We will provide further details to the market as the project progresses and plans become more concrete.

This is the Head of AI Business Strategy, Kim Ji Hoon. Let me respond to your second question of the plan to charge the A. service. As of the end of September, the cumulative subscriber for A. has surpassed 10,560,000, and that is a growth of 8.3% versus the end of June. When we include the other A. function users outside of the A. app, which mainly refers to the phone and the BTD, and the total MAU exceeded 10 million as well. So, we were able to achieve this performance within 2 years from the official launch, the achievement, meaning that subscriber over 10 million and the AU exceeding 10 million. That is thanks to the continuous service sophistication and active expansion into the external platform.

Last June, we have launched note and briefing. In August, we offered 4.0 update on the agentic workflow function has been added, and this has garnered a strong response from the users. In September, A. is made available in T Map and contributed further to the increase in AU. The B2C paid model will be reviewed -- are under review, and that will be most likely in the form of the subscription or the branded products centering around A. pillar services, and our target launching period is the first half of 2026. Until that time, we will continue to focus on improving usability of A.'s core services and expand the customer base. So, regarding the B2B profit model, including the A. agentic workflow, that will be implemented into the T Map, and we expect the revenue generation from the fourth quarter, and that will be the beginning, and we expect a gradual expansion of the revenue.

The last question will be presented by Hong-sik Kim from Hana Securities.

I will have to ask some difficult questions. Then you have started the quarterly dividend payout. But this quarter, you have decided not to declare the dividend. And from the perspective of the investors who have been waiting for this cash flow from the dividend, we are at a loss, and I'd like to understand more visibility into the future. And according to the business report, there are some companies that are showing higher degree of the visibility or the productivity when it comes to the dividend. So, in that line, I'd like to ask the company, do you have any plan for the future dividend? And if so, please share. So, if you are not able to provide any dividend for the third quarter, I believe that there should be some sufficient response going forward. So please specify them. And at this point, this is, I believe the high time that you need to revisit the plan to provide dividend on a quarterly basis because you have made the disclaim or announcement some time ago, but you are not able to provide this quarterly dividend for this quarter. So, this is extremely a regrettable situation, I have to say.

And the second question is that according to the report that the ground or the basis of providing the dividend is the 50% of the consolidated net income. And it is our existing understanding is that it is adjusted consolidated net income, but it turns out the decision to waiver the third quarter dividend is based upon not adjusted, but the net income of this quarter. So does that suggest that in case of any future incidents that might involve the significant onetime expenses, then there will be some wavering of the dividend for the particular quarter. So please share with us your dividend profile.

So let me respond to your question. This is the CFO. So, as you might understand and appreciate that we have been providing the stable provision of the dividend based upon the strong performance. But due to these unforeseeable incidents that we're not able to provide the dividend for this quarter. As a CFO, this is an extremely unsettling situation, and I'd like to extend my sincere apology to the investors. So, we take your question and the feedback with great heart and try to figure out the best way forward. And I'd like to give you this commitment as a CFO that we will make every effort to normalize our business environment, and this is something that I will share the commitment to you on behalf of every single employee of SK Telecom.

So let me respond to your question about the 50% of the adjusted consolidated net income. So, in relation to our shareholder return policy, the company classified items such as operating revenue and operating expenses, which arise from its principal business activities, as recurring income or loss items. And conversely, nonoperating income and expenses are not directly related to the operating activities are categorized as nonrecurring items. The administrative fine imposed by the PIPC this year is classified as a nonrecurring item. The customer appreciation packages, and the SIM card replacement costs are directly associated with the company's core business activities and therefore, are not regarded as one-off or nonrecurring items.

The company's shareholder return policy, which is returning 50% of adjusted consolidated net income, represent a symbolic lower bound. This threshold expresses our commitment to provide dividends at a higher level than the minimum target. And historically, our dividend payout ratio has remained above this level. For additional inquiries, please contact our IR organization, and we will make sure that you get the full response.

This concludes our Q3 '25 earnings call. If you have any further questions, please contact us. Thank you.