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SK Telecom Co Ltd. (SKM - Analyst Report), a leading wireless communication service provider, has reached its target of having 7 million LTE (Long Term Evolution) subscribers by the end of 2012. A huge demand surge for LTE service in South Korea has aided the company to reach its year-end goal.
SK Telecom rolled out its superfast mobile network service in July 2011 and had only 630,000 LTE users at the end of November 2011. It took a mere 18 months for the company to achieve its target, much shorter than the time taken to achieve 7 million 3G customers.
The Seoul-based company has deployed its LTE network to almost 99% of South Korea’s population and is adding about 60,000 new customers every day. The company has attributable the extraordinary subscriber growth to Apple Inc.’s (AAPL - Analyst Report) iPhone 5, which gained huge popularity from its customers.
LTE users now account for almost 26% of SK Telecom’s revenue as compared to a 2.4% revenue contribution by the end of November 2011. Backed by a secured and unmatched network quality, the company expects to double its present LTE subscriber base by the end of 2013.
The roll out of LTE services has accelerated in different parts of the world but has achieved the highest growth in countries like the U.S., South Korea and Japan. According to ‘Wireless Intelligence’ data, these three countries account for almost 87% of the world’s 27 million LTE connections.
Higher proliferation of smartphones and tablets along with increased games, HD-movie downloads is putting huge pressure on networks, resulting in slower network speed. Therefore, in a bid to boost its network speed and retain its customer base from other competitive carriers, SK Telecom is focused on offering a differentiated LTE service.
We believe a rising per capita income and increasing adaptation of smartphones and tablets will fuel the demand of this high-speed mobile network, which in turn will allow SK Telecom to further improve its LTE subscriber base.
We maintain our long-term Neutral recommendation on SK Telecom. However, it has a Zacks #2 Rank, implying a short-term Buy rating.
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