[Korean] Good afternoon. Welcome to the conference call for the fiscal year 2013 Third Quarter Earnings Results by SK Telecom. This conference will start with a presentation followed by Q&A session. And now, we'll begin the conference of the fiscal year 2013 third quarter earnings results by SK Telecom.

[Korean] Good afternoon, and my name is Young-Gyu Park, the IRO of SK Telecom. Today's conference call will consist of the presentation on the third quarter 2013 earnings results as well as some management plan and strategic direction by our CFO, Soo Cheol Hwang, followed by a Q&A session. [Korean] We also have with us the executives from the relevant business units to help deepen your understanding. [Korean] We will be providing consecutive interpretation for the call. Let me also remind you that all the forward-looking statements are subject to change depending upon the macroeconomic and market conditions. Let me now present our CFO, Soo Cheol Hwang.

[Korean] Good afternoon, and this is Soo Cheol Hwang, the CFO of SK Telecom. [Korean] Let me start with the consolidated financial results for the third quarter. [Korean] Revenue increased 0.2% quarter-on-quarter to KRW 4,124,600,000, boosted by the rising ARPU of the telecom business, along with the consistent growth of the new businesses, such as the B2B solution business. The B2B business posted the top line of KRW 456.9 billion for Q3, led by the KRW 115.7 billion quarterly revenue from the B2B solutions segment, all growing well towards the annual revenue target of KRW 530 billion. [Korean] In line with the top line growth, the operating income was up 1.1% quarter-on-quarter to KRW 505 -- KRW 551.4 billion, backed by cost reduction through our continuous efforts to realize competitive paradigm shifts as we strive for the ultimate customer value creation through -- in which the customer benefits. And in addition to the improved retention, ongoing market stabilization trend and the resulting data revenue expansion, we anticipate the future earnings to gradually and consistently improve going forward. [Korean] Net income stood at KRW 502.2 billion, rising 7.4% compared to the previous quarter, thanks to factors, such as the positive business results from SK Hynix. [Korean] I would like to touch upon the strategic direction and results by business line. [Korean] The billing ARPU for Q3 grew 2.6% quarter-on-quarter to KRW 34,909 bolstered by the widening LTE subscriber base and the expanded data user experiences. We expect to meet the annual growth target of 4% without too much trouble. [Korean] Last September, SKT launched T Sports Pack and B tv mobile pack to offer affordable access for subscribers with ever rising usage of large package-size video services, especially the T Sports Pack is gaining popularity with 200,000 users as of the…

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[Korean] [Operator Instructions] [Korean] The first questions will be provided by Mr. Ahn Jae-Min from Kiwoom Securities, and the next question will be provided by Mr. Yang, Jong In from Hanggul Investment Securities.

[Korean] I have the following 2 questions. My first question pertains to your investment plans on the wideband LTE 1.8 gigahertz network. What is your CapEx plan going forward? And is there a likelihood that your CapEx investment next year is likely to go down on a year-on-year basis? That's my first part of the question. And my second question has to do with your launching of new data package services, such as T Life Pack that you have introduced in your opening remarks. You mentioned that the number of subscribers currently stands at about 200,000, so I was wondering how that type of product launch has positively impacted your business, especially on your ARPU?

[Korean] I believe your first question pertains to our CapEx plans for next year. As you are well aware, starting from 2012, SK Telecom has already been making the necessary investments in the 1.8 gigahertz network already. So basically, we will do our very best to expand our CapEx expenditure within the annual guidance announced at the beginning of this year. However, since we have been allocated this very competitive wideband spectrum, I believe that we are in a better situation competitively compared to our other peers. So there can be some possibility of some preemptive or advanced CapEx expenditures going forward, but we will do our best to keep within our guidance. [Korean] Of course, it is a little too early to mention anything about CapEx expenditure plans beyond next year. However, what I could tell you is that going forward, if you look at the long-term CapEx expenditure trajectory, I believe that the likelihood is more stabilizing downward trend of CapEx. [Korean] I believe that you were asking about the impact on ARPU and our business through the recent launches of specialty services, such as T Life Pack services. As you are well aware and as we have mentioned earlier, SK Telecom has recently launched products, such as T Sports Pack, as well as B tv mobile pack. And as you can see, SKT is continuously making efforts to lower the burden on the part of our subscribers and to expand the user experience for data usage experience, so that we could further widen the base for future monetization opportunities. So we will continue to do so in the future. [Korean] Although the current portion of those subscribers opting for these services are not as large as we would like, however, we believe that these types of continuous efforts will eventually lead to higher likelihood of upward trend of ARPU. And by help maximizing the customer satisfaction, we could also support the loyalty of the customers and also enhance retention.

[Korean] The next questions will be presented by Mr. Yang, Jong In from Hanggul Investments Securities. And the following questions will be presented by Mr. Kim Hoe Jae from Daishin Securities. Jong In Yang - Korea Investment & Securities Co., Ltd., Research Division: [Korean] Yes, I have the following 2 sets of questions. My first question pertains to your outlook on the competitive landscape for the fourth quarter. As you are well aware, recently, the government has been announcing various regulatory commitment, for instance, regulations, possibly getting reinforced on the subsidy side, et cetera. And I believe that the launch of the wideband LTE services between the different players could actually add to the competitive pressure. So how do you feel -- foresee the competitive dynamics towards Q4? Do you think that it will be further fierce, become fiercer, or do you think that it will become easing somewhat? And my second question is, I believe that during 2013 and 2014, the likelihood of the LTE subscriber growth is very high. However, going beyond 2015, where do you see the long-term growth engine?

[Korean] To address your question regarding our outlook on the competitive landscape for Q4, I believe that we cannot completely prevent competitive pressures coming from our competitors in order to enhance their respective market shares. However, as we have done in the past to date, as the leading player in the industry, we will refrain from sensitively or overreacting to such competitive pressures. [Korean] And just as we have done in order to stabilize the market conditions to date, I believe that such market stabilization efforts going forward will be the right accountability that is placed upon the leading player in the industry. [Korean] To answer your second question regarding our future growth engines beyond 2015, as you are well aware, I believe that the overall profitability of the MNO business is gradually recovering at the moment. So in addition to that, we will do our best to pretty much open up our business structures so that we could potentially enter into partnerships and alliances with all types of partners that is connected to the ICT ecosystem beyond 2015. For example, the B2B solutions, as well as the healthcare businesses, might be some examples of such future growth engines. [Korean] I believe that we have, on numerous occasions, reiterated our commitment on this particular strategy in the growth engine aspect, so let me reassure you that our business plans are on track as we speak.

[Korean] The next questions will be presented by Mr. Kim Hoe Jae from Daishin Securities. And the following questions will be presented by Mr. Dan Kong from Deutsche Securities. Mr. Kim Hoe Jae, please go ahead with your questions.

[Korean] I have 2 questions. First question pertains to SK Planet. I believe that until recently, SK Planet has been in its early growth stage, therefore, you have been mentioning consistently that its contribution to the bottom line has not been that significant. But recently, SK Planet has launched its TV commercials, so shall we interpret this recent change of marketing efforts to mean that its profitability contribution has began -- begun in earnest already? Any stance change on SK Planet? My second question is the following: I believe that you are planning to launch advanced LTE services with speeds up to 225 and 300 mega bps, so once you speed up your services next year, you have plans to increase your prices of LTE services?

[Korean] If I may open up the answer portion before I hand it over to my partner, I believe that after the spinoff of SK Planet in 2011, it has been developing various services and acquiring the number of subscribers from all those different services to date. So far, its contribution to our bottom line is quite minimal. However, let me hand it over to the representative from SK Planet in charge of finances to further elaborate on this point.

[Korean] My name is Kim from SK Planet, and I'm in charge of the Finance Department. And I believe that your question pertains to the newly launched TV ad and how it is impacting our overall performance and its contribution to SK Telecom as a whole. To answer your questions, I believe that in 2013, we have been very much working on and focusing on expanding our platforms and enhancing the loyalty of our customers so that we could bring about new values to our customers. And I believe that services, such as T Store and T Map, have been gaining the number of subscribers in 2-digit number on a year-on-year basis. [Korean] And to elaborate a little bit about the newly launched TV commercials on our service called New OK CashBag, we have been very much focused on actually improving the user usability and conveniences on the mobile side by focusing on the mobile support, especially when it comes to the usage of the OK CashBag points and the -- actually, the loyalty points on the mobile teams, we have been working very hard to enhance the convenience of the usage experience as well. And as for the 11th Street business, we have been very much focused on maintaining our leadership in the open market position, and I believe that our profitability in this regard is eventually going to lead to profitability increase. So through these 2 main focus core businesses, ultimately, I believe that we will be contributing to the bottom line of the bigger company.

[Korean] To address your second question regarding the possibilities of price increase on higher speed services to be provided at the speed of 225 and 300 mega bps beyond the end of next year, I believe that you are asking as to whether the price increase is in the plan. Actually, at this particular juncture, I believe it is too early to comment on the price plan approval, which could or could not, may not take place beyond next year. And as you are well aware, as the significant market operator, SKT is subject to government approval whenever we could actually upgrade or increase our price plan. [Korean] At the moment, as the speeds and the volume of the data usage increase, we are more focused on launching more number of specialty services, such as Life Pack services that we have launched, and we will continue to do so going forward in order to enhance the -- our competitiveness.

[Korean] The next questions will be presented by Mr. Dan Kong from Deutsche Securities, and the following questions will be presented by Mr. Tien Shen Do [ph] from GIC. Mr. Dan Kong, please go ahead with your question.

[Korean] I have the following 3 questions: You have been launching wide LTE -- wideband LTE services, as well as LTE Advanced services, and I was wondering how do you foresee the ARPU growth going forward into 2014. I believe that this year, that ARPU growth rate was about 4%. So what's the percentage that you anticipate for next year? Second question has to do with your CapEx plan. As you were talking about 2013 and '14 CapEx question earlier, you did allude to the fact that you might actually decide to conduct some early execution of CapEx early on, this year possibly. So can you at least give us some color as to the direction of the CapEx movement into next year? Is it going to be upward or downward trend? And third question, what is the trend of your mobile -- fixed mobile convergence? What is the current status? And what is your expectation going forward?

[Korean] Regarding your first question about our outlook on ARPU for 2014 in light of the fact that we have launched wideband LTE, as well as LTE Advanced services this year, as you are well aware, during the third quarter this year, we have launched specialty services, which tend to offer higher volume of data services, and we have actually, in the process, achieved steady and continuous growth of ARPU trend. [Korean] Going into next year, we believe that the number of LTE subscribers portion of the total subscriber base is likely to go up as well. So next year, as we further reinforce the launching of such specialty service packs that we have launched recently, we believe that steady and consistent ARPU improvement is expected. [Korean] Regarding your second question about CapEx directionality, I did mention earlier that there is a small likelihood that we may experience and a little bit additional CapEx expenditure this year, and it is to further widen the gap between -- against our competitors in order to grow our competitiveness if we do so. [Korean] As for the directionality of the CapEx expenditure from SK Telecom's perspective, we believe that we have sufficient likelihood of continuing the downward trend of the CapEx expenditure. [Korean] Of course, some more exact and detailed guidance on the CapEx numbers would be provided during the first quarter of next year. However, what I could tell you right now is that the future trend will be stabilizing downward trend. [Korean] And your third question had to do with our current trend with regards to the fixed mobile convergence offering. At the moment, between SK Telecom and SK Broadband, we are offering services such as All Family Free service price plan, and this is a very differentiated price plan. And as of the end of Q3 of 2013, the number of mobile subscribers opting for such bundled services stood at 3.9 million subscribers. [Korean] And as for the utilization of our existing mobile subscribers, we want to maximize the network effect by offering more attractive and T&T family benefit offering programs so that we could actually bring in more number of subscribers, and so that we could further strengthen the mutual lock-in between the members of the family as the overall subscriber members of our company.

[Korean] The next questions will be presented by Mr. Tien Shen Do [ph] from GIC, and the following questions will be presented by Mr. Sam Min from Morgan Stanley. Mr. Tien Shen Do [ph], please go ahead with your questions.

Thank you for the opportunity to ask a couple of questions. I have 2 questions. The first is just on your non-consolidated income statement, your parent income statement. There is a loss from nonoperating items of about KRW 263 billion. I'm just wondering what that amount is and whether that's a nonrecurring item? The second question is just on your discussions with the regulators to do on MVNOs. Have you had any discussions with the regulators on them pressing you to reduce your wholesale rates for MVNOs? Or is that subject still not under discussion? [Korean]

[Korean] Let me elaborate on the nonoperating income item, which is the non-consolidated version on SK Telecom alone. I believe that the biggest item that impacted our nonoperating item in our overall financial statement happened to do with the spectrum-auction-related allocation process. As you are well aware, in the process of being reallocated with certain spectrum, we had to actually resubmit our existing holding of 1.8 gigahertz spectrum. And in the process, accounting-wise, we have actually realized disposition gain, and based on the book value of such asset, we have recorded about KRW 200 billion in disposition gain. [Korean] So to recap my -- the answer to the first question, the nonoperating income item that you mentioned earlier happens to be a one-off factor. So regarding your second question regarding our discussions with the regulatory bodies, especially in relation to the wholesale price on the MVNO business, let me actually hand it over to the representative in charge of the CI strategy to answer this question.

[Korean] This is the head of the CI strategy division. Let me answer your second question. Regarding the network usage fee, which is a wholesale fee that is charged on MVNO players, we usually have these discussions each April every year to conduct discussions based on the business result reports that are submitted in the previous year. So based on such discussions, we usually come up with a newly revised rate. So as usual, on the date of April 1 this year, we had another round of discussions on the network usage fee decisions on the MVNO operators this year. So at the moment, we are not conducting any additional discussions on this topic. So probably, the next round of discussion on this topic will take place in April time frame next year probably.

[Korean] The next questions will be presented by Mr. Sam Min from Morgan Stanley, and the following questions will be presented by Mr. Sean Oh from Merrill Lynch. Mr. Sam Min, please go ahead with your questions.

I was wondering if you can address the discrepancy between your quarterly ARPU growth and your mobile service revenue decline on a quarterly basis. There seems to be some issues on MVNOs, as well as seasonality, and if you can address those, I would appreciate it. Secondly, yesterday, your competitor mentioned that by second half of next year, that it will be able to deliver 300 mega bps by aggregating 3 different bands, one of which is the wideband. Do you think that poses, say, sort of a threat from a competitive differentiation perspective? And when do you think the next spectrum auction will take place? [Korean]

[Korean] Let me address your first question regarding the discretion that is shown on our non-consolidated stand-alone P&L of SK Telecom between the mobile-telephony-related service revenue versus the ARPU trend. As you are well aware, within SK Telecom's build -- our billing ARPU number, unlike that of the competitors, we are actually including the data revenue coming from SK Planet as well, and also the reduction in the subscriber number, if any, that is usually reflected in the ARPU number as well. On the top line number, the revenue number, it is already reflecting the impact coming from the reduction of the sign-up fees as well. So I believe that for those reasons, we might show some discrepancies between the trend shown on the mobile service revenue versus ARPU. [Korean] To elaborate a little bit, I believe that the revenue coming from SK Planet going forward is expected to draw an upward trend. And as SK Telecom's competitive edge is further reinforced, the number of subscriber base is likely to further increase as well. And the impact of the sign-up fee reduction being reflected on the revenue number will continue to go down year-on-year as we proceed into the future years. Therefore, I believe that the ARPU upside going forward will be positive. [Korean] Regarding your comments about our competitors mentioning they're able to -- their ability to offer the 300 mega bps services in the near future, you were asking whether it could prove to be a threat for SK Telecom. I am not sure how much time they are actually considering at the moment, but as you are well aware, SKT boasts world's first commercialization of the LTE Advanced services for the first time in the world. And based on such technological prowess, we will also be very active in leading in the Carrier Aggregation of the 3-carrier-mode bands as well. So in this regard, we are confident that we will still maintain the technological leadership going forward. [Korean] And you were asking about the time line that we are anticipating for future additional spectrum-allocation type of an auction. I believe that for now, considering the amount of spectrum that is allocated to us, I believe that it would be more than sufficient until next year. So at this particular juncture, we do not anticipate any such discussions until next year period.

[Korean] The next questions will be presented by Mr. Sean Oh from Merrill Lynch. Mr. Sean Oh, please go ahead with your question.

[Korean] Two questions from me as well. I believe that starting from August period, I think that you are starting your IBNR and I believe that -- I'm wondering when will your sign-up fee decrease action start taking impact? Is it going to take place in the middle of next year or at the end of next year? So could you provide some more color as far as the timing of the sign-up fee reduction? And secondly, your competitors are claiming that they are having this spectrum upper hand because of the abundance of the spectrum that they currently hold. So how do you see this situation? Do you think that having more than sufficient spectrum for these players will have significant meaning in terms of being able to offer more data volume per se?

[Korean] To answer your first question regarding the likely timing of further sign-up fee reduction next year, I don't think that we have come to any conclusions or discussions on the exact timing of such reduction. [Korean] Regarding your comments about our competitor's claim that having more abundant spectrum adds to their competitiveness, I think that it is inappropriate for me to comment on our competitor's comments. However, what I could tell you is that just simply having ample amount of spectrum will not be the best thing in and of itself. In other words, I think it would be more critical to secure and utilize the amount of spectrum that you really need and to make the necessary services, related investment for the benefit of the customers.

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[Korean] The following questions were presented by Mr. Neale Anderson from HSBC.

I just had a quick question on churn. It's been coming down very steadily. I just had 2 questions relating to that. Firstly, what do you think is the main factor -- the main thing that you are doing that is driving down churn so successfully? And secondly, assuming that, that continues to come down, when would you expect it to have a meaningful impact on your retention expenditure, your marketing spend on retaining customers? [Korean]

[Korean] Your first question had to do with our success factors in successfully lowering our churn rate. As you are well aware, we have been actually taking the leading role in moving away from simply subsidy-based competition to take away other competitors' subscribers but rather to focus on the service and the quality so that we could help change this competitive paradigm. [Korean] Thanks to such efforts, our third quarter churn rate, on a quarter-on-quarter basis, has come down, and also, especially in the month of September, the reduction was most notable. And going forward, I believe that the churn rate will further stabilize, number one, because of the government's commitment to further stabilize the market, and they're making such efforts as we speak and they're showing their commitment to that end. And also, SKT has been leading our leadership in changing the competitive paradigm to more focus on the retention-based marketing rather than new acquisition. So I believe that overall, additional churn rate stabilization will be likely going forward. [Korean] Regarding -- your second question about our churn rate reduction trend impacting the overall marketing expense trend will be answered by the Head of Marketing Strategy team present here today.

[Korean] To answer your question regarding the marketing expense related impact, as the Marketing Strategy Division Head, what I could tell you is that starting from the beginning of this year, SK Telecom has been very much focused on giving preferential treatment to our existing customers and subscribers. And I think that by providing more support and marketing programs geared towards handset upgrades for existing customers, we successfully lowered the churn rate. And I think that as the handset upgrade customer number increases within our existing subscriber base, that tends to lower the mobile number portability number as well. As you are well aware, usually, the marketing expenses get to go up significantly and market becomes too heated mainly because of the MMP-related marketing efforts. Because of the changing paradigm that we are leading at the moment, I think that further stabilization will be likely.

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[Korean] In that case, we will now close the Q&A session and invite the closing remarks from our CFO.

[Korean] Thank you for taking part in today's conference call for SK Telecom. [Korean] As mentioned earlier, SK Telecom will do its utmost to spearhead the transition into the data era while help fostering healthy competitive landscape so that we could ensure both the company's continuous growth and the shareholder value enhancement. We ask all the investors and analysts for your advice and encouragement.

[Korean] With that, this concludes the earnings conference call for Q3 2013. Thank you.