SK Telecom (NYSE:SKM) announced its earnings for the third quarter of 2010: revenue of KRW 3.181 trillion, operating income of KRW 519.3 billion and net income of KRW 363.9 billion.

The revenue grew 4.1% year-on-year (YoY) and 3% quarter-on-quarter (QoQ) as the increasing popularity of smartphones led to growth in high-priced flat rate plan subscribers and wireless Internet revenue.

The wireless Internet revenue expanded by 16% YoY and 7.7% QoQ to record KRW 768.1 billion and the number of flat-rate data plan subscribers reached 5.43 million as of late September 2010, marking 77.8% growth YoY and 35.4% QoQ. Thanks to the introduction of the unlimited data service, subscribers of All-In-One 55 or higher priced plans took up 56% of total All-In-One Plan* subscribers in September, representing a significant increase from 40% in June.

* SK Telecom’s All-In-one Plan includes All-In-One 35, All-In-One 45, All-In-One 55, All-In-One 65, All-In-One 80 and All-In-One 95. Since August 2010, the company offers free unlimited data service to subscribers who pay KRW 55,000 (All-In-One 55) or more.

Operating income dropped 16.1% YoY and 10.8% QoQ due to increase in depreciation cost affected by expanded investment expenditure in 3Q.

Investment expenditure in 3Q jumped 69.3% YoY to stand at KRW 487.3 billion. In particular, network investment – mainly used to build Wi-Fi networks and expand HSPA+ network - grew by a whopping 94.2% compared to the previous year.

As of late September 2010, the cumulative number of subscribers increased by approximately 5% YoY, from 24.13 million to 25.44 million. Meanwhile, marketing expenses stood at KRW 750.6 billion based on the marketing cost calculation method put forth by the government, down 1.5% YoY from KRW 761.7 billion and 2.8% QoQ.

Although SK Telecom took the leading role in stabilizing the market by complying with the KCC’s marketing expense guideline* in both July and August, its 3Q marketing expense amounted to 23.9% of the total 3Q revenue as the competition in the market intensified again around the competitor’s introduction of iPhone 4 in September.

* The KCC’s marketing expense guideline encourage mobile operators to spend no more than 22% of mobile revenues on mobile marketing

The 3Q Average Revenue Per User (ARPU) of smartphone subscribers - including voice call charges and data communication fees while excluding subscription and connection fees - recorded KRW 57,000, which is KRW 2,000 higher than that of the previous quarter.

Meanwhile, total ARPU stood at KRW 41,923, up 2% QoQ and down 1% YoY. ARPU growth rate was relatively low due to the introduction of pay-per-second billing, subscription fee cuts and expansion of discount plans. 

As a result of SK Telecom’s analysis on customers’ data usage pattern since the introduction of the unlimited date service, data usage volume in September increased by 1.6 folds for 3G and by 1.2 folds for Wi-Fi, compared to August. This shows that, since the implementation of the unlimited data service, customers show a preference for 3G network that ensures constant access to the Internet while on-the-go.

B2B revenue in 3Q marked KRW 257 billion. Total B2B revenues this year to date stood at KRW 613.5 billion increasing by 75.1% compared to that of the previous year. SK Telecom has plans to further expand its mobile office business, currently being offered to some 580 companies including Posco and Geumho Asiana. The company is also promoting the commercialization of its mobile office solution for SMEs within the fourth quarter this year.

SK Telecom’s CFO Jang Dong-Hyun said, "SK Telecom has been making aggressive efforts to secure foundation for growth while improving its profitability. As the result, the company is acquiring more smartphone subscribers and bearing fruits in its IPE business. SK Telecom will continue to take a multifaceted effort to achieve a constant performance in the future."