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Moody's: SK Telecom's 2015 results in line with expectations

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Moody's Investors Service says that SK Telecom's 2015 results were largely in line with the company's A3 issuer and senior unsecured bond ratings. The ratings outlook remains stable.

"SKT's 2015 reported EBITDA fell slightly by 0.3% year-on-year to KRW4.7 trillion," says Gloria Tsuen, a Moody's Vice President and Senior Analyst. "Its revenue and reported EBITDA margins remained largely stable."

SKT's reported debt grew to KRW7.6 trillion at end-2015 from KRW6.9 trillion at end-2014, driven largely by a share buyback, following its full acquisition of SK Broadband Co., Ltd. (unrated) during the year. As a result, Moody's estimates that its adjusted debt/EBITDA rose to about 1.9x in 2015 from 1.7x in 2014.

Given its continued investments in its next-generation platform businesses - including investments in CJ HelloVision - SKT's leverage will remain at around 1.9x in 2016, a level that is towards the high end of the tolerance level for the company's A3 ratings.

Moody's expects that SKT's financial profile will continue to be supported by its strong market position, moderate capital expenditures, and containment of marketing expenses.

"However, increasing investment appetite in its next-generation platform businesses, as well as higher shareholder returns, could pressure its financial metrics and be credit negative," adds Tsuen.

SK Telecom is the largest mobile telecommunications provider in Korea by subscribers, with an estimated 49.4% market share at end-2015. Its core business is to provide voice and wireless Internet services for mobile phones.

The company owns SK Broadband, Korea's second-largest fixed-line operator by subscribers. It also holds a 21% stake in SK Hynix Inc. (Ba1 stable), which engages in the design, manufacture and sale of memory chips.

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