“SK Telecom: Entering the Transition Period for Value Increase”

Volume 1

Nov. 2012

COMPANY REPORT

SK Telecom transitioning for value growth

 SK Telecom’s competitive advantage will further magnify as the market cools down  EV to appreciate in-line with ARPU turnaround; LTE ARPU, an important indicator  LTE network efficiency and longer use of technology to enhance MNO growth and profitability  Rapid paradigm shifts from fixed to mobile provides significant growth potential in mobile games, ad and commerce; SK Planet’s current value estimated at 1~2 trillion Won  B2B solutions, healthcare and fixed/mobile IPTV businesses to show strong growth

SK Telecom‟s competitive advantage to amplify as market competition stabilizes

Since 2007 the market experienced heated competition when WCDMA network and smartphones were introduced. But as the respective penetration rates reached 30~40%, market competition subsided. A pattern which is expected to be replicated in the LTE market next year

In addition, reduction in costly subscriber acquisition activities and increased focus on retention and internal handset upgrades are expected as:

 each mobile operator completes their nationwide LTE network rollout,

 high-ARPU LTE subscribers‟ contracts start to mature, and

 SK Telecom‟s (“SKT” or the “Company”) introduction of early contract-termination penalty policy this November (other operators are expected to follow suite) reduces market mobility

The expected launch of iPhone5 may spark competition, but considering that the entire iPhone market in Korea is estimated at around 5%, the impact is expected to be limited

WCDMA, Smartphone, LTE Penetration and Marketing Expense Trend

Given operators‟ core competitiveness and subscriber base, LTE Net-add Market Share the most significant assets, the market is expected to revert to the previous structure over the mid- to long-term, with SKT 50% 47.0% 45.2% 50.2% SKT maintaining its No. 1 market position

38.5% 31.3% As the market stabilizes, SKT‟s numerous competitive 30% 28.5% KT advantages, including service offerings, network quality, and 14.6% LGU+ 23.5% 21.3% customer services, will become more pronounced 10%

1Q12 2Q12 3Q12

No. 1 in three major customer satisfaction surveys for 13 consecutive years

SKT, the clear overall leader in the telecom industry, has been ranked first by NCSI (National Customer Satisfaction Index) and KCSI (Korea Customer Satisfaction Index) for 15 consecutive years and by KS-SQI (Korean Standard Service Quality Index) for 13 consecutive years

These awards clearly indicate SKT‟s inherent competitive edge in call quality, wireless internet and handsets offering, and an unmatched customer service experience

NCSI KCSI KS-SQI

Note: Total customer satisfaction scores for each respective survey SKT‟s differentiated services continue to contribute to increasing customers‟ mindshare. In a recent survey by Cetizen, of nearly 3,400 people who intent to buy an iPhone5, 64% chose SKT as their preferred service provider. The primary deciding factors mentioned were LTE quality, membership benefits, and customer services

Preferred Operator for iPhone5 Reasons for Preferring SKT

Others 16% LTE Quality AS & CS 44% 19% SKT

64% Membership 19%

Source: Cetizen.com, Oct., 2012

EV will increase as ARPU rises

In the past, the growth of the telecom industry was largely driven by rising penetration rates and ARPU. As the penetration rate reached saturation, the primary telecom value driver started to mirror ARPU trends, which slid due to tariff cuts and emergence of disruptive business models However, the recent reversion to a positive sloped ARPU, a trend that is expected to continue for some time, will continue to enhance the value of telecom operators

LTE ARPU is the main indicator of future growth

SKT‟s total ARPU is expected to show a prolonged period of positive growth. The Company leads the LTE market 3Q12 ARPU with over 6 million subscribers as of October, but due to „000 KRW its large +26 million subscriber base, the proportionate 60 52 growth is slow. However, the fact that SKT‟s LTE ARPU is 50 nearly 60% higher than the blended ARPU allows the 40 33 Company to enjoy an overall ARPU growth over an 30 extended period 20 SKT continues to realize over 2/3rd of new LTE subscribers 10 signing up for the LTE62 (monthly plan of 62,000 Won) or 0 higher price plans. Furthermore, the Company is Blend LTE confident that it will maintain the highest LTE ARPU in the Korean market, as was the case with 2G and 3G ARPUs

LTE network efficiency to improve profit prospects

The LTE network is more efficient from a cost and technological standpoint compared to that of 3G, i.e. it is more effective in managing data and expectations are that the LTE will remain as the primary technological platform for a significantly period of time

Compared to 3G technology, LTE‟s spectral efficiency is 3-times greater and increases further with the use of LTE-Advanced, which boasts a significantly higher data throughput speed. In addition, LTE equipment is data-centric, therefore is less expensive than the voice and data-based 3G equipment

Transmission Speed Comparison among Networks & Technologies

WCDMA(R4) HSDPA(R5) LTE(R8/R9) LTE-A(R10)

Commercial deployment Dec. 2003 Apr. 2006 Jul. 2011 2H12 (expected)

Bandwidth 1FA 2 X 5MHz 2 X 10MHz 2 X 40MHz

Speed (DL/UL) 2M/384Kbps 14.4M/384Kbps 75M/23.5Mbps 600M/188Mbps

Note: LTE - 2 X 2 MIMO (Antenna technology, “Multiple Input Multiple Output”), LTE-A - 4 X 4 MIMO

Given that discussion for 5G technology has yet to begin, SKT expects 4G to be the primary mobile platform for about 10 years (from concept develop to standardization, it takes approx. 5 years, and another 5 years for commercialization). Whereas, the previous 2G and 3G networks were followed by successive technologies within 5~6 years of commercialization

Technology Standardization Trends

LTE(R9) LTE-A(R10) LTE-A(R11) LTE-A(R12)

Time of standardization ~‟09.12 ~‟11.3 ~‟12.9 ~‟14.6 discussions

Note: The greatest difference between 3G and LTE technology is the adoption of OFDM and MIMO technology. There are no indications of such significant technological changes and discussion for 5G has yet to take place

SK Planet‟s leading position in the expanding mobile games, advertising and commerce markets to contribute SKT‟s corporate value growth

 IDC projects by 2016, more global Internet users will access the Internet through mobile devices than through PCs

 Cisco expects the average mobile network speed to increase 9-fold to 2.9 Mbps by 2016, up from 315 Kbps in 2011, and that the number of mobile devices will exceed the world population of 7 bn in 2012 and reach over 10 bn by 2016

 In Korea, LTE penetration is expected to reach over 70% by 2015, up from 25% in 2012 In anticipation of such market developments in the mobile space, SKT spun-off SK Planet last year. Leveraging its rich experience in mobile contents and services, SK Planet (“SKP”) continues to solidify its leading position as No.1 mobile platform player This section will focus on SKP‟s market position in the rapidly growing mobile games, advertising and commerce businesses

T store: Developing and expanding the Digital Content Marketplace with mobile games

As evidenced by the recent popularity of SNS-based games in Korea, the spread of smartphones is spurring growth of the mobile-games business. This is largely in-line with growth projections for overseas and Korean mobile games markets CAGR of 17.7% and 54.1% YoY, respectively by 2015 Given the ① the portability of mobile devices, ② continued improvements in network and devices, and ③ the increasing use of mobile platforms such as mobile SNS, the growth of mobile games market is likely to exceed expectations While intensifying competition among mobile game developers is increasing development risks and pressuring margins, mobile platform companies are exposed to less risk and enjoy much more stable profits SKP has made a solid entrance in the mobile games market segment and is expanding into video, music and e-books. By continuing to differentiate its mobile platform, SKP aims to expand its Digital Content Marketplace globally. In 3Q12, T store, the largest app platform in Korea with nearly 360,000 listed items and over 17 mn users, reached the 1 bn cumulative download milestone with sales of games accounting for 60% of T store‟s revenues

To further differentiate T store‟s game offerings, SKP plans to expand into game publishing business in order to secure games on a preferred status. Furthermore, through partnerships with SEGA and TAT JOY (No.1 global platform advertising company), SKP is strengthening its global game sourcing base to improve its competitiveness and profitability

Mobile Game Market T Store Sales Mix tn Won Overseas market CAGR: 17.7%

Other 20%

VOD Games Korea market CAGR: 54.1% 20% 60%

Source: IDC 2012, Gartner and Samsung Securities

tn Won T ad: To monetize core SKP businesses to pursue growth

Mobile ad market is still in its infancy, overlooked by advertisers due to the perceived lower adverstising impact over the smaller screens of mobile devices. However, as the reach of mobile devices continues to expand, and consumers‟ usage pattern becomes increasingly mobile-centric vs. PCs, the focus will shift to the rapidly growing mobile ad market Globally, the mobile ad market is projected to jump from $6.4 bn in 2012 to $23.6 bn in 2016. The Korean market, ranked 4th following the United States, Japan, and the United Kingdom, is expected to grow from $0.45 bn in 2012 to $0.76 bn in 2016 (eMarketer, Jul. 2012) SKP‟s T ad business is well positioned to capitalize on this growing mobile ad market, further enhancing its ad business portfolio of SMS/MMS push ads, LBS ads and in-app. ads. In-app. ad is rapidly becoming one of the preferred mobile ad segments with hits on SKP reaching 6.5 bn monthly page views in 3Q12 SKP‟s competitive advantages in the mobile ad market stems from ① T store, Korea‟s No. 1 apps marketplace, which boasts a significant reach, ② its expansive customer base, largest in Korea, that allows for effectively target marketing, and ③ its years of experience in the mobile industry. In 2013, SKP plans to leverage its strengths and assets to intensify efforts by entering the SNS ad market and utilizing its various platforms such as T map, Cyworld, NateOn and 11th street to pursue an integrated new media ad business

Korean Mobile Ad Market T ad In-app. ad Metric $ mn bn PV 1,000 760 690 8 6.5 620 750 540 450 6 500 320 4 250 1.3 2 0 0 11 12E 13E 14E 15E 16E Source: eMarketer, Jul. 2012 3Q11 3Q12

Mobile 11th street: Outright leader in the m-commerce market

According to Gartner, global mobile commerce market is projected to grow from $73.5 bn in 2012 to $234.1 bn in 2015. The Korean market is also forecast to show strong growth. Daishin Securities anticipates the market size to jump from 1 tn Won in 2012 to 2.5 tn Won in 2015 A recent survey by KCC (Korea Communications Commission) of smartphone usage patterns found over 60% of smartphone users surveyed have used mobile shopping and 35.5% of those users mobile shop at least once a week. Future growth prospects of the mobile commerce market continues to gain momentum due to increases in ① accessibility of mobile shopping, ② regulatory ceiling for mobile device-based payment (Currently, 300,000 Won), and ③ awareness/acceptance of and enhanced security of mobile payment SKP‟s mobile 11th street is Korea‟s leading mobile open-market shopping destination with more than 50% of the market. Through 3Q12, SKP recorded over 11 million download of the 11th street app. and cumulative GMV (Gross Merchandise Value) more than twice that of last year‟s total of 81 billion Won Mobile 11th street, optimized for smartphones, has a friendly user-interface that makes it convenient to search and buy product over a secure payment process. Its marketing in conjunction with OK Cashbag, Korea‟s largest membership program, will further differentiate mobile 11th street, which expects GMV to more than double in 2013

Korea m-Commerce Market Mobile 11th street GMV tn Won bn Won 80 3 2.5 3 60 2.0 2 40 1.4 2 1.0 20 1 0.6 0 1 3Q11 4Q11 1Q12 2Q12 3Q12 0

11 12E 13E 14E 15E

Source: Daishin Securities Note: The market is composed of openmarket, and various shopping malls, including social and specialty malls

SK Planet‟s current value estimated at 1~2 tn Won

The primary businesses at SKP; T store, 11th street and T map, are on a firm growth path. Especially in the mobile space where the market is rapidly evolving to higher speed networks and adoption of smartphone devices continues to quicken Sums of the parts comparison valuation of SKP‟s businesses, including its listed subsidiaries indicate a potential value in excess of 2 trillion Won. Given that the company is still in its initial growth phase, the financial multiple-based valuation is premature. However, even on EV/EBITDA and PER comparisons to possible Asian peers place its value at 1.1-1.6 trillion Won.

Sum-of the-Parts Valuation

1) Basis of valuation SK Planet Business Company Metric EV (tn Won) Metric EV (tn Won)

2) Cumulative downloads Cumulative T store 0.12 0.2 750 m downloads: 1,240 m

3) 11th street Market share 39.2% 1.6 Market share over 30% 1.27

4) Hoppin 2 m paying subs 2.2 110K paying subs 0.12

SK Comms Market cap. 305.7bn Won (Nov. 16, 2012) Ownership 64.6% 0.20

Loen Market cap. 342.7bn Won (Nov. 16, 2012) Ownership 67.6% 0.23

400% YoY increase in in-app ads to 6.5 bn PVs in 3Q12 T ad α Korea mobile ad market size to reach $540 m in 2013 (eMarketer)

Monthly active users of 5.85 m. Use of location API for B2B solutions T map α business. Cooperative efforts with global car makers (Renault Samsung)

Registered users of 10.25 m, 16 m app. downloads Tic Tok (SNS) α (Global launch of Tic Tok Plus in Oct. 2012)

Implied SK Planet value 2 + α

1. Based on expected 2012 results 2. Appia, provider of +140,000 apps in approx. 175 countries, is an independent app/content marketer who secured funding on Mar. 2011 3. Valuation attributed to G market when eBay acquired the company in Apr. 2009 4. Valuation of Hulu when the major shareholders bought shares from existing shareholders on Apr 2012

Asian Peer Multiple Valuation

EV/Sales EV/EBITDA PER

1) Asian Peer Median ~ Mean (x) 3.0 ~ 3.5 7.3 ~ 8.9 15.8 ~ 18.0

2) Implied SK Planet value (tn Won) 3.2 ~ 3.8 1.3 ~ 1.6 1.1 ~ 1.3 1. Based on 19 Asian Internet/software companies 2. Based on expected 2012 results

B2B solution business to show strong growth as ICT development spurs innovations in connectivity

The proliferation of the smart devices and advancements in ICT technology such as HTML5 and NFC are stimulating demand for connectivity and accelerating convergence in the ICT space. As such, there has been a steady rise in need for various B2B solutions Indeed, with the B2B solutions business showing strong double-digit growth, SKT expects solution revenues to contribute 50% to total B2B revenues by 2015. The five core business segments that SKT is focusing are Smart Store, Smart Work, Smart Cloud, Green & Safety, and M-Ad & Payment

SKT B2B Sales Forecast Core solution business

tn Won 3.0 3 100% B2B Smart Solution portion Store

2 1.5 50% 50% Smart M-Ad & 1.1 Work 5 Core Payment 1 20% Solution 15%

0 0% Smart Green & 11 12E 15E Cloud Safety

Aging population, advancements in ICT and medical technologies provide significant upside potential for healthcare

Rising average age of the population, increasing social Domestic Smart Healthcare Market awareness of health-related issues, coupled with 3.1 tn Won advances in ICT and medical technologies have created 0.5 a rapidly growing healthcare industry. By 2014, the 0.6 Silver 1.6 Korean healthcare market is expected to move above 3 0.3 Medical tn Won, largely driven by growth in general healthcare 0.3 2.0 Wellness management needs 1.0 To take part in the rapid growth of the healthcare industry, SKT is focusing on gaining core competencies 10 14E in diagnostic and healthcare management. To this end, Source: Korea Health Industry Development Institute it ① invested in NanoenTek, a PoCT (Point of Care Welness : Healthcare services to the general public Medical : Diagonosis and treatment services for the ill Testing) device company, ② established a joint venture Silver : Medical services to seniors, over 65, or the disabled with Seoul National University Hospital called „Health Connect‟, and ③ invested in a Chinese molecular diagnostics device company, Tianlong in Sep.

Strong growth potential for IPTV as digital broadcasting becomes the standard and market acceptance of mobile IPTV expands Korea IPTV Market By 2015, Korea‟s broadcasting market is m projected to rise to 3.6 tn Won with mobile 10 60% Subs contributing another 0.5 tn Won. As the fixed 8 IPTV/High-speed internet IPTV user-base continues to expand and the 40% robust LTE network continues to spur growth of 6 mobile IPTV, SKT‟s IPTV service subsidiary 4 20% promises to show meaningful growth 2

0 0% 9 10 11 12E 13E 14E Source: Hyundai Securities

Summary

MNO business poised to show value growth

 Prospects for profitability continue to improve following the early LTE market competition. As implied in overwhelming lead in customer satisfaction surveys, SKT‟s competitive advantage in network, service offerings and customer services will only magnify as the market stabilizes

 The ARPU uplift impact of LTE, pushing up overall ARPU for the first time in many years, points to rising corporate value. SKT leads the industry with the highest LTE ARPU, and a profitable 2G and 3G subscriber base; a combination that assures extended growth and profitability

 Initial LTE investments have been complete. LTE‟s higher technological and network efficiencies to lend to a more stable investment environment

SK Planet, one of SK Telecom’s growth pillars, contributing to growth and corporate value

 SKP aims to become a global wireless platform company by leveraging its growing businesses; Digital Content Marketplace, commerce and social network

 SKT is confident that the market will accord SKP its well earned-value as the leading mobile platform company, contributing the SKT‟s growth

 SKP‟s operating and financials implies a current EV of 1~2 tn Won

Growth of B2B solutions, healthcare, and IPTV businesses to enhance SKT’s value

 Widespread use smart devices and advancements in ICT technology are stimulating demand for B2B solutions. SKT is targeting 1.5 tn Won in solution sales by 2015

 Healthcare industry is showing rapid growth on the back of increasing social awareness of/need for healthcare, and advances in ICT and medical technologies. SKT is positioning itself with the key players to spearhead growth in the areas of diagnostics and healthcare management services

 SKT to enhance its growth momentum in the IPTV market, by strengthening its presence in the mobile IPTV segment

Contact Info.

IR Contacts Tel No. e-mail

Hong Kyu Park 82(0)2-6100-4509 [email protected]

Jeong Hwan (Jack) Choi 82(0)2-6100-7203 [email protected]

Dong Seop Kim 82(0)2-6100-1464 [email protected]

Seung Oh Yoon 82(0)2-6100-1632 [email protected]

Hun Lee 82(0)2-6100-1334 [email protected]

Woo Sun Cho 82(0)2-6100-1638 [email protected]

In Kyoo Joo 82(0)2-6100-1625 [email protected]

Disclaimer

This material contains forward-looking statements with respect to the financial condition, results of operations and business of SK Telecom and its subsidiaries (the “Company”) and plans and objectives of the management of the Company. Statements that are not historical facts, including statements about the Company’s beliefs and expectations are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements.

The Company does not make any representation or warranty, expressed or implied, as to the accuracy or completeness of the information contained in this management presentation, and nothing contained herein is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Such forward-looking statements were based on current plans, estimates and projections of the Company and the political and economic environment in which the Company will operate in the future, and therefore you should not place undue reliance on them.

Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. Additional information concerning these and other risk factors are contained in the Company’s latest annual report on Form 20-F and in the Company’s other filings with the U.S. Securities and Exchange Commission (SEC).