Good afternoon. I am Joong Suk Oh, Head of IR Planning at SK Telecom. Today's conference call will consist of the presentation on the earnings results for Q1 of 2021 and the future management plans and strategic direction by Poong Young Yoon, CFO and Head of Corporate Center 1; and Hyung-il Ha, Head of Corporate Center 2, followed by a Q&A session. Today, achievements and strategic plans for MNO will be provided by Poong Young Yoon, Head of Corporate Center 1; and Hyung-il Ha, Head of Corporate Center 2, will discuss that of the new ICT businesses. Today's conference call will provide consecutive interpretation. And we have with us executives from relevant business divisions to help deepen your understanding. Before we begin, we want to remind you that all forward-looking statements are subject to change depending on the macroeconomic and market situations. Now let me now present our CFO.

Good afternoon. This is Poong Young Yoon, CFO of SK Telecom. First of all, let me express my appreciation to investors and analysts for their continued support. On April 14, SK Telecom announced that it was reviewing a plan for a spin-off, which would result in a telecom company and a holding company with semiconductor and new ICT assets. We plan to use the spin-off to increase shareholder value and create the most optimal structures for telecom business and new ICT businesses, respectively, thereby accelerating their growth. To fulfill the purpose of the spin-off, we completed the cancellation of treasury shares worth KRW 2.6 trillion in market value, which account for 10.8% of the total issued stocks. The planned spinoff was designed to prioritize shareholder value and we believe that we have gained a good understanding of the investors in the market. We will carry out the plan with a strong conviction and make sure that all the necessary decisions are finalized within the first half of the year. Now let me discuss the consolidated earnings highlights for Q1 of 2021. Consolidated revenue for Q1 of 2021 recorded KRW 4.7805 trillion. All business divisions enjoyed growth year-on-year; and media and safety and care posted a double-digit growth, marking a 7.4% year-on-year increase. But the figure declined 1.2% Q-on-Q due to the base effect of higher seasonal sales in Q4. Consolidated operating income increased by 29% year-on-year and 17.4% Q-on-Q to post KRW 388.8 billion. MNO and Media led the operating income improvement by achieving both revenue growth and cost efficiency. S&C and Commerce also contributed to earnings with their Y-o-Y growth in operating income. Net income recorded KRW 572 billion, posting an 86.9% growth year-on-year and a 54.2% growth Q-on-Q, thanks to equity method in common SK Hynix and sales…

Good afternoon. I am Hyung-il Ha, Head of Corporate Center 2. Allow me to discuss the achievements and plans for the new ITT businesses. First is the Media business. The number of pay-tv subscribers of SK Broadband stands at 8.69 million as at the end of Q1. Established by SK Broadband in January as a multiple program provider, Media S began regular broadcasting in April. In partnerships with Kakao Entertainment and SM C&C, 70% of the programs are exclusive content unavailable on other TV channels. SK Broadband will strengthen the value chain in the Media business that encompasses content, channels and platforms. wavve will further enhance competitiveness of original content, such as Taxi Driver that is enjoying high viewer rating. We recently hired chief Producer, Tae-Hyun Lee, well-known for dramas such as Signal and Stranger, as Chief Content Officer; and we're in the process of establishing a content planning studio. Next is the Security division, which is renamed as Safety and Care division. Launched in March, the emerged entity of ADT Caps and SK Infosec will leap forward as Korea's #1 integrated security company. In addition to achieving growth in the existing security domains, we will expand technology-based business models in new security domains such as securities for home, unmanned stores and cloud. ADT caps recently signed an agreement to cooperate with AWS for Cloud Security business. By combining ADT's cloud security services with AWS Solutions, we will promote business together to gain market share in the financial and public sectors where there is high demand for transition to cloud. Also, we're in the process of selecting a lead underwriter for IPO of ADT Caps, and we will do our best to prepare for the IPO. Next is Commerce business. Despite intensifying market competition, Commerce achieved growth in both revenue…

Thank you, Mr. Ha for your presentation. Dear investors and analysts, we are pleased to have delivered earnings that exceeded consensus in this quarter. We announced the spin-off plan and canceled treasury shares to enhance shareholder value. We also demonstrated that the fundamentals in all our businesses have been strengthened. I understand that many people want to know more about our dividend policy. After final decisions concerning the spin-off are made at the Board in the first half of the year, we will share with you more details, including a decision on the quarterly dividend. We will continue to do our best for a successful spin-off. Let me reassure you that all the decisions we make will be to maximize shareholder value. We ask for your continued support and interest. Thank you.

Now the Q&A session will begin. [Operator Instructions] The first question will be provided by Tae-Wan Oh from Korea Investment & Securities.

I would like to ask two questions. The first question is regarding the spin-off plan. Wavve and FLO were not mentioned in your recent disclosure. So I'd like to learn how these businesses and subsidies -- other subsidiaries will be divided between the surviving company and the spin-off company after the spin-off? The second question is related to your subscription service plan. You mentioned that in the second half of the year, you are going to launch an integrated subscription service. So can you provide us with some updates on your Subscription Service business plan?

Mr. Oh, thank you very much for your questions. Let me first answer your question regarding where wavve and FLO will go after the spin-off. After the spin-off, the surviving company will grow as an AI-based infra company by combining the fixed and wireless telecommunication infrastructure and pursuing growth based on AI-centered subscription marketing and data center business. And the spin-off company will grow as an ICT investment company that is specialized in making aggressive investments in semiconductor, life platforms and global tech seating, thereby making various investments that will drive value up. In your question, you asked about wavve and FLO. They belong to media and content assets, thereby falling under the life platform area. So under the spin-off company, they will become global businesses that will lead new lifestyles of customers. As for the specific business portfolios of the surviving company and the spin-off company, these will be finalized at the Board within the first half of the year. Let me now address your question regarding the Subscription Services. We have been accumulating our know-how and expertise in the subscription market by utilizing our telecommunication services. We believe that MNO is very competitive in providing subscription services. In various areas such as telecommunications, media and e-commerce, we have accumulated a large amount of data, and we have the digital infrastructure that can cover product planning all the way to offering. And we also have marketing competitiveness in both online and offline channels. Based on such expertise and capabilities, we believe that we can produce a sizable revenue not only based on SK Telecom customers, but also 50 million Korean people. Currently, we have been expanding the scope of subscription products through media, games, delivery and education. And we're now in the process of developing product curation and offering based on AI technology in order to offer optimal packages for our customers. Furthermore, we're going to transform the existing T membership platform into a subscription marketing platform that is provided for entire population in Korea in the second half of the year. The subscription market in Korea was KRW 49 trillion in size last year, and it is expected to grow to KRW 100 trillion of market by 2025. Our target for the subscription products and services is having -- the number of subscribers reached 35 million by 2025 and achieved the revenue size of KRW 1.5 trillion by 2025, by expanding partnerships and business models. I believe that we can take up about 20% of the market share of the subscription market that we can address.

The next question will be provided by Minha Choi from Samsung Securities.

I would like to ask 2 questions. The first question is, in April, you made a disclosure that you will carry out the spin-off. And you mentioned that decisions related to the spin-off will be made in the first half of this year. Can you share with us the upcoming schedule regarding the spin-off? The second question is related to the T Map Mobility. Recently, you received financial investments, and I believe that T Map Mobility will start to accelerate its growth trajectory. So what is the current status of T Map Mobility? And as for UT, which was launched in collaboration with Uber, can you provide us with some specific growth strategies on this recently launched business?

Thank you very much for these questions. I'm going to answer your question regarding the schedule for the spinoff, and Hyung-il Ha will answer questions related to the T Map Mobility. Currently, we are reviewing the overall process regarding the spin-off, and we aim to table the spin-off plan to the Board of Directors within the first half of the year. In consideration of the Board resolution process and the overall process for the spin-off and relisting, we believe that the relisting can be completed within November after the General Shareholders meeting in October.

I am Hyung-il Ha, Head of Corporate Center 2. I'd like to address your question related to the status of business of T Map Mobility after the spin-off. After officially launched in December last year, T Map Mobility is carrying out business in the 4 key areas, including the T Map Life Platform, T Map Auto, Mobility-on-Demand and Mobility-as-a-Service. In the first quarter of the year, we built the foundation for T Map Mobility by receiving KRW 400 billion of financial investments from financial investors, and we have launched UT in collaboration with Uber in order to offer differentiated services centered around taxis. In the second quarter, we plan to introduce a completely new type of subscription membership services in the business area of T Map Life Platform, and we also plan to launch a driver on demand service as a pilot for B2C customers. These new services on the 4 core business areas will be launched as scheduled, which are expected to provide differentiated customer experience. Now I'd like to discuss the future strategy and the upcoming schedules for UT. On April 1, UT was officially launched based on the joint investment of Uber and T Map Mobility. In the second half of the year, UT plans to launch a new service by combining Uber Taxi and T Map Taxi. Initially, services will center around contracted taxi drivers and premium taxi services. But going forward, we plan to offer various mobile services and additional value-added services based on the taxi platform. As a result, customers will be able to have more options in terms of taxi rights depending on the brands, price plans and services. And at the same time, taxi drivers will benefit from these new services by increasing their sales through differentiated services and by reducing the time to drive around to spot customers. We're not really able to give you any more details today, but we will be sure to communicate them with the market when the services are ready. Thank you.

The next question will be provided by Kim Hoi Jae from Daishin Securities.

I would like to ask 2 questions. The first question is related to your dividend policy. You mentioned that even though you start the quarterly dividend payout, the total amount of dividend payout will not go down. I'd like to know from when your quarterly dividend payout would begin? And what is the overall dividend payout policy for the 2 companies after the spin-off? The second question is related to your investment plan and business plan for wavve. You mentioned that by 2025, you are going to receive a KRW 1 trillion of investment and you have various plans for wave. But this is quite different from what you mentioned previously, when you're communicating with us regarding wavve plan by 2023. So the amount of investment and the amount of revenue seems to have declined slightly when you're adjusting your target for 2025. So can you provide us with some color on what is your overall investment plan for Wave, which you mentioned is going to be around KRW 1 trillion? And what is your revenue plan and schedule for Wave going forward?

Thank you very much for your questions. I'm going to address your question regarding the dividend policy, and Mr. Ha from Corporate Center 2 will address your question regarding wavve. Even after the spin-off, we will continue to maintain the shareholder-friendly management principle. We will make sure that regardless of the spin-off, the surviving company's level of dividend payout will be at least similar to that of last year. As Korea's #1 fixed and wireless telecommunications company, as the rollout of 5G is accelerating, we believe that our operating income and the cash flow will be sustained going forward. As such, we will make sure that we have the shareholder return policy so that earnings growth will lead to increased shareholder returns, including dividend payout. At the Annual General Shareholders meeting, we created a basis for quarterly dividend payout and after discussions at the Board of Directors, we will carry out this new dividend policy plan, so that we can start paying out the quarterly dividend by -- starting from the end of second quarter. The timing for the quarterly payout for the first quarter has already passed, but this portion will be combined for the fourth quarter dividend payout, so that we can maintain the level of dividend payout to our shareholders to be at least same or similar to that of last year. As for the spin-off company, which will become a specialized investment company, we will make sure that their growth potential of the investment portfolio will be recognized. And by actively attracting investment and pursuing IPOs, we will make sure that the corporate value of these businesses will be rightly recognized in the market. As for the dividend policy of the new company, after the spin-off is finalized and after the Board of Directors is composed, we will be able to communicate to the market more details later.

I am Hyung-il Ha, Head of Corporate Center 2. Let me first comment on the subscriber target and the revenue targets of wavve for 2023. As we increase the original content lineup and the popularity of Penthouse season 2 and as a result of the successful advertising with IU that began at the end of last year, wavve was able to enjoy the growth in its pay tv paid subscribers by reaching 2 million within last year. And this subscriber growth trend is continuing. As we continue to differentiate wavve services based on content from terrestrial broadcasting stations and original content, we believe that we can achieve the initial target of having 5 million paid subscribers and the revenue of KRW 500 billion by 2023, and we believe that we can achieve this earlier than the original target. Let me now comment on the ways we want to secure KRW 1 trillion of investment for wavve. In March, wavve made an announcement of making an investment in original content, which is worth KRW 1 trillion, which will be done by 2025. The financial sources for these investments will come from a variety of sources, including the rights offering of KRW 100 billion of the SK Telecom as well as external investments and reinvestment of profit from content business. As for raising external investments, we already received KRW 200 billion of financial investments in 2019, and we're now in the process of preparing for the second round of funding. As for this second round, as soon as details are prepared, we're going to communicate them with the market. Thank you.

The next question will be provided by Sean Lee from Citigroup.

I would like to ask 2 questions. The first question is related to your security business. The ADT Caps and SK Infosec were merged in the first quarter, so what's the current status and the operation of this merged entity? And what kinds of synergy are you expecting from this merger? The second question is related to your MNO business. What is your 5G subscriber target by the end of this year? I understand that your initial target by the end of this year was 9 million, but there was a very big net adds in the first quarter, so I'm asking this question.

Thank you very much for your questions. I will address your question related to the 5G subscriber growth trend. And Mr. Ha from Corporate Center 2 will answer your question related to the Security business. As we have made continued efforts to offer new 5G products and improve the service quality of 5G services, and as we were improving the 5G ecosystem with new flagship handset launches, we were able to achieve the 5G subscriber number to 6.74 million by the end of this quarter compared to last year. So there was a net add of 1.26 million compared to the end of last year. At the beginning of the year, we mentioned that our 5G subscriber target for this year was 9 million. But considering the current trend, we think that we can achieve even 10 million. The new tariff schemes for 5G and price plans that SK Telecom has recently offered to satisfy various customer needs are expected to provide customers with more choices and reasonable prices, thereby accelerating 5G migration.

Let me now respond to your question regarding the synergy of ADT Caps and SK Infosec. We successfully completed the process of merging ADT Caps and SK Infosec in March. As a result, we have emerged ADT Caps with the revenue size of KRW 1.3 trillion and EBITDA of KRW 357 billion. Now various activities are underway in earnest in order to maximize synergy from these 2 entities based on our infrastructure for security and various capabilities. We expect the annual revenue for '21 to be KRW 1.6 trillion. In addition, in order to become a global cloud security provider, we have signed an agreement to pursue strategic cooperation with Amazon AWS in April. I can discuss the effect of synergy from the customer perspective and product perspective. First of all, customer perspective, SK Infosec has a large volume of B2B customers, including large enterprises, and ADT Caps has B2C customers, including small and medium enterprises and single businesses. And by combining these different customer segments, we can create cross-selling opportunities. From the product perspective, we are expected to provide customized one-stop services that combine physical security, information security and building management as combined solutions. For instance, if -- when there is a cyber intrusion or detection of malicious codes, we can do video analysis by utilizing the platform data. And by leveraging on our access control system, we can detect any intruders to buildings and assets, and such flexible response will become more possible. Thank you.

The next question will be provided by Neale Anderson from HSBC.

Just have one question, please, and it relates to the Media business and the sequential improvement in operating margin in the first quarter. So for the 3 quarters, last year, it was around 6.7%, and it's increased to 7.8% in the first quarter. So my question is how sustainable is that? And what are your margin targets for this year?

[Foreign Language]

Neale Anderson, thank you very much for your question. We believe that there are various factors that have contributed to improvement in the operating margin of SK Broadband. So these various factors include the effect of the T Broad merger. That's the first factor. The second factor is the increase in the subscriber base and increase in the commissions income from home shopping, broadcasting. The third factor is the continued increase in the IPTV subscriber base. And the final factor would be effective CapEx implementation and cost efficiency. Going forward, we will continue to make efforts to increase the subscriber base and carry out our business in a more efficient manner so that we can maintain and increase profitability of the media business.

The next question will be provided by Stanley Yang from JPMorgan.

The first question is related to your dividend policy. You mentioned that detailed decisions regarding the payout -- the dividend policy for the spin-off company will be made soon. But can I safely assume that given the MNO dividend payout level of KRW 10,000 per share, and assuming that there will be dividend payout from the new spin-off company, can we anticipate that the total amount of dividend payout from SK Telecom will increase going forward? The second question is related to your Subscription business model. There are high expectations for subscription services. And I'd like to know if you're subscription model would be to push several subscription models and services separately or to follow the model of Amazon, where you have one single subscription platform where multiple services are provided? And if you continue to launch these new subscription services, are they going to be linked with your MNO telecom subscribers? Or are they going to be operated separately?

Thank you very much for your questions. I'm going to respond to your question on the dividend policy and Han Myung-Jin, Head of Subscription Service Company, will answer the second question. As for the first question on our dividend policy, your understanding is correct. The dividend payout from the MNO business as part of the surviving company will be similar or more than the previous level of dividend payout. And on top of that, we have not yet decided on the dividend policy of the spin-off company. But if they start to payout dividend, it's going to be a plus alpha. As I mentioned earlier, when the Board of Directors is composed for the spin-off company and when discussions on the dividend policy are made, we're going to communicate them with the market.

I am Han Myung-Jin. I'm the Head of the Subscription business, and let me address your second question. As you may understand, we have many family businesses under the ICT umbrella, and there are many different services and products that we're preparing that will help enhance the livelihood of customers. Basically, I can say that our model will be similar to Amazon Prime, where there will be an integrated subscription paradigm. In addition to that, we are planning to offer additional services and products for subscription. So we're planning to charge a monthly subscription fee for the subscription customers. As for your question regarding the connection with MNO services, we are currently planning this subscription platform to reach out to 50 million Korean population. So we're currently not considering any linkage between the subscription services and the MNO fees. Thank you.

We would now like to close our conference call for the first quarter of 2021. Thank you.