SK Telecom
Experiments on RFID

Posts a net income of 368.4 bln won in its 1st qtr. performance

SK Telecom has teamed up with Korea Ginseng Corp. and Shinsegae Department Store to conduct a joint Radio Frequency Identification (RFID) project on an experimental basis.
SK Telecom, the nation's largest mobile telecom operator, Korea Ginseng Corp. and Shinsegae I&C signed a memorandum of understanding on the introduction of an RFID system in the private logistics sector on May 26th.
The agreement involves management of genuine Cheong-Kwan-Jang, the brand of red ginseng products, manufactured by Korea Ginseng Corp., on the market in Korea and abroad. Under the deal, clients can check the authenticity of Cheong-Kwan-Jang products and circulation process through mobile RFID cell phones that can read all the information recorded in the RFID tag.
SK Telecom, the chairman company of the Korea RFID/USN Association, will take charge of building up an infrastructure for introducing RFID development of mobile FRID platforms and terminals. SK Telecom will conduct the red ginseng authentication system via overseas roaming services.
Inking a strategic alliance with SK Telecom last February, Shinsegae I&C also plans to put to the test RFID automatic recognition system the company has jointly developed with Electronics and Telecommunications Research Institute and sell products carrying the RFID tags through its outlets.
Korea Ginseng Corp. plans to protect its clients from a flood of fake Chinese-made ginseng products and low-priced ones, thus raising the value of its own brand.
Lee Myung-sung, executive director in charge of strategic technologies at SK Telecom, said "SK Telecom will push ahead with plans to explore diverse business models in the wake of the experimental FRID project."The private-level FRID project is differentiating a government-initiated one because it involves market applications and clients can purchase products carrying tags during the experiment period. The experiment will be conducted on the outlets of Korea Ginseng Corp. and Shinsegae Department Store.

1st quarter business performance

SK Telecom announced on April 28th that the company achieved a net income of 368.4 billion won, operating income of 614.5 billion won and total sales of 2.41 trillion won, for the 1st quarter of 2005. Net income and operating income decreased 18.6% and 11.1% respectively, and total sales revenue grew 0.5% over the same period in 2004. Compared to the 4th quarter of 2004, net income and operating income increased 5.8% and 3.4% respectively, while total sales was down by 2.9%.
Sales revenues rose slightly, helped by an increase in subscribers as well as wireless Internet revenue growth. This occurred despite the adjustment of interconnection fees last April, and the tariff reduction of last September. Wireless Internet sales revenue were KRW 547.7 billion, representing a 40% growth compared to the same period last year. It was also a 1% increase on a quarter-on-quarter basis. This increase can be attributed to the introduction of a variety of data flat rate plans such as the Data Free Rate Plan, and the continuous growth of phone mail service. SK Telecom's wireless Internet revenue represented 25% of the total cellular service revenue, greatly contributing to the growth of the company's overall sales.
Due to the decrease in network interconnection expenses, followed by a reduction of call traffic volume, the company's operating income and net income rose 3% and 6% respectively when compared to the previous quarter. Due to the increased interconnection fees from the interconnection rate adjustment and tariff reduction, the operating income and net income fell by 11% and 19% respectively, on a year-on-year basis.
An SK Telecom official revealed that the marketing expense for the quarter were KRW 436 billion, which was a 9% decrease from those in the same period of 2004. Due to the full-fledged launching of the mobile number portability system in January of 2005, SK Telecom's subscription fees for acquiring new subscribers increased. However, management fees and maintenance fees for our subscriber base decreased in accordance with the company's policy toward new subscriber-focused marketing approaches. This is the important factor that caused a decrease in marketing expenses. For the 1st quarter, SK Telecom stayed within the Annual Guidance of 18.5% for marketing expenses, as we maintained marketing expenses at 18.1% of overall sales revenue for the quarter.
Due to tariff reduction, the company's average revenue per user (ARPU) came to KRW 42,557, a 2% decrease on a year on year basis. It also fell by 4% compared to the 4th quarter of 2004. This was due to seasonal factors, such as decreased number of working days.
Ha Sung-min, CFO of SK Telecom (head of Management Support Group) commented, "Even though the 1st quarter was an inactive period for the mobile phone market, SK Telecom achieved 24% of the targeted KRW 10 trillion in sales for the year 2005. This has laid a stable base for accomplishing our targeted total revenue in 2005" He also added, "The launching of SK Telecom's new services, such as satellite DMB and WCDMA, are designed to secure new growth engines that are expected to contribute a great deal to the increase in ARPU, as well as subscriber loyalty."

Targets European GSM Market

SK Telecom will soon make its entry into the European GSM market with the GPS-based children safety service called 'i-Kids.' SK Telecom announced on May 24th that the company has signed a contract to sell the GSM-based 'i-Kids' solution for 310,000 EURO (390 million won) to SF-Alert, a mobile security firm in the Netherlands. Under the deal, SK Telecom has decided to acquire a 20 percent stake in SF-Alert.
Under this contract, SK Telecom will be managing the technology, providing the server and software-combined 'i-Kids' solution as well as' i-Kids' handsets customized for GSM operators in SF-Alert. At the same time, SF-Alert will take charge of marketing and sales of SK Telecom's 'i-Kids' solution-based children's safety service and 'i-Kids'handsets, to major European mobile communications operators, distributors, and home shopping companies such as KPN, MCC, and Wehcamp.
SK Telecom will be realizing 20% of SF-Alert's net profit, which will amount to at least KRW 40 billion over the next 5 years.
'i-Kids' is a children safety service that allows parents identify their children's current location and traveling routes by using GPS technology via their cellular phone or computer. Nexmore has managed to develop this service application, and Bellwave was in charge of developing the 'i-Kids' handset (BGL-100).
SK Telecom's 3G Reality Center in Seoul is currently in the final stages of developing the GSM-based 'i-Kids' handset, and plans to supply 200,000 of these handsets to the European market through SF-Alert, during this year.
The company will start offering the GSM-based 'i-Kids' service in the Netherlands, by June of 2005, and intends to expand its service area to 3 European countries, including France and Germany, by the end of this year. SK Telecom will work toward ultimately providing the service in 21 countries in Europe.
In addition, SK Telecom plans to diversify the range of the service by applying 'i-Kids' service's mobile security functions to location inquiry, and robbery prevention, of high-priced vehicles such as small vessels, automobiles, and motorcycles.
Lee Myung-sung, executive vice-president and head of SK Telecom? Strategic Technology Group, commented, "Our successful advancement into Europe signifies that SK Telecom's mobile telecommunications technology is being acknowledged in the European market."He added, "Based on its technological competitive edge, SK Telecom will continue to search for ways to offer a variety of products and services in the European market."

Representatives of SK Telecom, Korea Ginseng Corp. and Shinsegae Department Store join hands after signing an MOU on a joint RFID project.

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