2015 2H Outlook: Korean Telecom service industry

2H15
Outlook
Report
June 10, 2015
2
4
16
40
44
60
[Summary] Getting over the hump
I. 2H15 outlook: Getting over the hump
II. Key themes and issues: O.V.E.R.
III. Valuation & investment strategy
IV. Top pick & stocks to watch
SK Telecom
KT
LG Uplus
[Conclusion] Look to earnings improvements
and dividend payout
Telecom Service
Getting over the hump
Jee-hyun Moon
+822-768-3615
jeehyun.moon@dwsec.com
Overweight
(Maintain)

2H15 Outlook 2
Domestic telcos are positioned for a rebound in 2H15
Notes: ARPU stands for average revenue per user
Source: Company data, Thomson Reuters, KDB Daewoo Securities Research
25
30
35
40
45
50
55
60
28,000
30,000
32,000
34,000
36,000
38,000
04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F
(p)(W)
ARPU of 3 major telcos (L) FTSE Korea Telecom Index (R)
LTE penetration
- Earnings recovery
- Shareholder-friendly policies
- Reflection of value of new businesses
- Slow ARPU growth
- Concerns over new service plans
- More pressure from government

2H15 Outlook 3
Positioned for a rebound in 2H15
• Stocks to look for a rebound after pullback in 1H
• Increasing worries over policy headwinds
• Strong need for new business strategies to overcome
reckless competition and regulations
Keys to recovery:
1) Looking beyond subscribers
• Focus shifting from expanding subscriber share to
increasing usage
• Ongoing efforts to boost ARPU and IoT accounts
2) Looking beyond telecom
• Focusing on non-telecom businesses that can benefit the
existing telecom business
• Media and platform are taking the lead
3) Looking beyond profit
• Capex and expenses declining due to LTE saturation and
handset distribution law
• Improved FCF points to more room for shareholder returns
• All three telcos to hand out dividends this year; SK Telecom
to buy back shares
Key themes and issues:
• Sector keyword: O.V.E.R.
O) Opportunity: New opportunities in mobile-only era
• Emergence of B2B data market and platform business
expansion
• IoT initiatives to pick up pace (e.g., telcos to be allowed to
make devices themselves)
V) Velocity: The battle for speed continues
• Spectrum allocation and auctions on the horizon
• Gearing up for the 5G era
E) Encouragement: Encouraging data usage
• Continued efforts to improve ARPU
• Segmentation of data plans based on usage and
time/place/occasion
R) Regulations: Regulations/policy direction are key
• Pullbacks triggered by policy worries: Buying opportunity
• Key issues: 1) Creation of fourth telco, 2) improvements
to tariff approval scheme, and 3) potential revisions to
handset distribution law

Telecom
Service
2H15 Outlook 4
Notes: Average number of PC and mobile searches for “phone bill” and “fourth telco” based on a maximum of 100
Source: Naver Trend, Thomson Reuters, KDB Daewoo Securities Research
Policy issues and telco index
The greater an issue household
telecom costs become, the
more downside pressure arises
on telco stocks
A number of government efforts
are underway to ease
telecommunication costs,
including the potential creation
of a fourth telco
Telecom service sector
poised for recovery
• Telco stocks are poised for a rebound in 2H after correcting in 1H
• Attention is turning from earnings to shareholder returns (i.e., dividends and buybacks)
• Telcos need to come up with business strategies and momentum to overcome competition and
regulatory risks
TIP
0
20
40
60
80
100
37
39
41
43
45
47
49
51
6/14 9/14 12/14 3/15 6/15 9/15 12/15 3/16
(max=100)(p)
FTSE Korea Telecom (L)
'Phone bill' search frequency (inverted, R)
'Fourth telco' search frequency (inverted, R)
Prices fell as search
queries for "phone bill"
and "fourth telco" increased
Telcos likely to bottom around 3Q;
solid fundamentals
(i.e., earnings, dividends) to draw
attention thereafter

Telecom
Service
2H15 Outlook 5
Source: SK Telecom, KDB Daewoo Securities Research
Competition has shifted from subsidies to products/services: Where will the next battle be?
Competition in data plans is
vitalizing telco products and
services
Excessive competition is
penalized with regulations
• Subsidies-driven marketing was a classic example of the industry’s reckless competition
• The introduction of the handset distribution law has cooled subsidy competition
• Now, competition is oriented towards products and services, as illustrated by the recent release of
new data plans
• Where will competition be focused next?
TIP
Subsidies
Switch
phone
New
(MNP)
Products/
services Subsidies
Products/
services
- Monthly plans
- Bundled products
- Membership
- Contents/platform

Telecom
Service
2H15 Outlook 6
Source: KDB Daewoo Securities Research
Telcos need to broaden their target group to all types of users
The number of users accessing
telecom networks without a
subscription is increasing
(MVNO, sponsored data, WiFi,
etc.)
1) Looking beyond
subscribers: The concept
of “users”
• The concept of “users” is coming into focus
• To enhance ARPU, an effective strategy is to charge any person or entity (including service
providers and indirect users, in addition to postpaid subscribers) for network access
TIP
Subscriber
Individually
contracted
direct users
Decrease
Increase
Diluted economies of scale,
decrease in ARPU
Subscriber basis + improving ARPU
User
Service providers;
Indirect users

Telecom
Service
2H15 Outlook 7
Notes: US$20 per month for unlimited voice and text; US$10 for one gigabyte of data; Available only for Nexus 6 users
Source: Google, KDB Daewoo Securities Research
Google’s Project Fi taps the networks of two major US carriers
Internet companies are
venturing into telecom services
in an effort to increase their
own traffic by providing
seamless connectivity
1) Looking beyond
subscribers: The concept
of “users”
• Network access by non-subscribers is growing; Key example is mobile virtual network
operator (MVNO)
• MVNOs are mobile service providers that lack their own infrastructure and therefore lease wireless
capacity from major carriers
• Google’s Project Fi, a type of MVNO service launched in April, uses the networks of both Sprint
and T-Mobile
TIP

Telecom
Service
2H15 Outlook 8
Source: KTOA, MSIP, KCC, company data, KDB Daewoo Securities Research
Wireless service revenue: Subscribers vs. ARPU
In a market with a stagnant
population, it is critical to
increase ARPU
1) Looking beyond
subscribers:
ARPU > volume
• Industry’s marketing war may end once companies let go of their fixation on subscriber
share
• Since mobile subscriber penetration reached 100% in 2011, companies have made numerous
efforts to raise ARPU
• The first such effort was the deployment of LTE; the second was service diversification
TIP
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
10
15
20
25
30
07 08 09 10 11 12 13 14
('000 persons, W)(Wtr) Service revenue (L)
No. of subscribers (R)
ARPU of 3 major telcos (R)
Subscriber growth (+5% on average)
brought about increase in revenue
Increase in ARPU (+8% on average)
brought about increase in revenue
Pene-
tration
above
100%

Telecom
Service
2H15 Outlook 9
Source: Gartner, KDB Daewoo Securities Research
Increasing number of internet-connected devices
Expanding the customer base
from people to “things”
1) Looking beyond
subscribers: IoT
• The advent of Internet of Things (IoT) has increased the number of device accounts
• Service plans dedicated to wearables are being introduced in a bid to further lift ARPU
• Device-to-device connection (via Bluetooth) does not generate network revenue
• The development of more convenient devices and services is essential to encourage wireless
network usage
TIP
0
5
10
15
20
11 13 15F 17F 19F 21F
IoT devices
CAGR: 22%
(bn units)
Consumer
electronics
6.3bn
Buildings
4.9bn
Auto
2bn
Utilities
2.2bn
Healthcare
1.1bn
Other
1.6bn
2022F
18bn devices

Telecom
Service
2H15 Outlook 10
Selection and concentration in non-telecom businesses
A key priority for business
diversification should be
synergies with existing
businesses
2) Looking beyond telecom:
Synergy effects from non-
telecom services
• Companies should take a selection and concentration approach, focusing on non-telecom
services that can benefit their existing telecom business
• Fixed-line: Pressing need to address weaknesses and increase network utilization
• Wireless: Diversification into areas that can contribute to maintaining subscribers and improving
ARPU
Initial period
Stabilization
period
Transitional
period
Businesses
that can pull on
existing subscribers
Businesses
that help
retain wireless
subscribers
& increase ARPU
Businesses
that can increase
size of revenue
Non-telecom?
TIP

Telecom
Service
2H15 Outlook 11
Source: Company data, KDB Daewoo Securities Research
Telcos’ platform businesses are moving towards media and e-commerce
Beneficial to growth and re-rating
2) Looking beyond
telecom: Media and
platform
• Within non-telecom, media and platforms are taking center stage
• Media: Telcos’ media operations complement their fixed-line and wireless businesses, and have
strong upside to ARPU
• Platform: Telcos’ platform operations are focused on expanding the mobile space, and have the
potential to become global; In particular, the development of the internet market has moved
towards the communications and e-commerce segments
TIP
Portal, music download – App store, communication – Video streaming – Commerce, fintech
Olleh market
U+ App
market

Telecom
Service
2H15 Outlook 12
Source: Softbank, KDB Daewoo Securities Research
Softbank’s enterprise value scenario
In M&As, Softbank believes it is
important to gradually move up
the value chain
2) Looking beyond
telecom: Softbank’s
example
• Softbank’s M&A deals have been geared towards platforms
• The Japanese company is turning its eye to platforms that can be built upon its network infrastructure.
• Major platform deals include the acquisition of e-commerce sites and service apps
• One major advantage of the platform business is its global scalability
Aiming to become the goose
that lays golden eggs
- Premium for successful acquisitions
- Diversification within ICT industry
- Enhancing enterprise value from a
long-term perspective
TIP

Telecom
Service
2H15 Outlook 13
Notes: Based on consolidated K-IFRS; Combined figures of SK Telecom, KT, and LG Uplus
Combined operating profit and FCF of the three domestic telcos
Operating profit is normalizing
from last year’s sluggishness
3) Looking beyond profit:
Earnings already
normalizing
• Operating profit is normalizing this year, supported by low base of comparison
• Capex declining due to LTE market saturation
• Disciplined marketing spend following introduction of handset distribution law
TIP
-1,000
0
1,000
2,000
3,000
4,000
5,000
10 11 12 13 14 15F 16F
(Wbn) Operating profit FCF
Operating profit: +81%
FCF turned positive

Telecom
Service
2H15 Outlook 14
Correlation between SK Telecom’s dividend yield and foreign buying
Dividend stocks to make a
comeback
Shareholder returns
• During times of volatility, dividend stocks offer a reliable bet
• In the case of SK Telecom, foreign buying tends to increase when the stock’s expected dividend
yield rises
• The steeper the pullback, the greater the dividend appeal
TIP
3.0
3.2
3.4
3.6
3.8
4.0
4.2
-0.20
-0.15
-0.10
-0.05
0.00
0.05
0.10
0.15
0.20
6/14 8/14 10/14 12/14 2/15 4/15 6/15
(%)(%p) Daily change in foreign ownership percentage (L)
Expected dividend yield (R)

Telecom
Service
2H15 Outlook 15
Notes: 2015F dividend yield is based on our DPS estimates and the most recent closing price
Dividend yield trend of the three domestic telcos
A consistent dividend policy
should narrow valuation
discounts
On a P/E basis, telcos with
a 3-5% dividend yield and those
with a yield over 5% are trading
at 10% and 33% premiums,
respectively, vs. telcos with
a yield lower than 3%
All three telcos to hand
out dividends this year
• SK Telecom is likely to increase its interim and full-year dividends and plans to repurchase shares
• KT, which suspended dividends last year, could resume payments this year
• LG Uplus maintains a 30% payout policy
TIP
4.0%
2.7%
2.6%
0
1
2
3
4
5
6
7
2011 2012 2013 2014 2015F
(%) SK Telecom dividend yield KT dividend yield LG Uplus dividend yield
All three providers
expected to pay
dividends in 2015
No dividends
No dividends

Telecom
Service
2H15 Outlook 16
Opportunity
New opportunities in the mobile-only age
Velocity
Battle for speed continues
Encouragement
Encouraging more data usage
Regulation
Regulations/policy direction are keyR
VO
E
Keyword for 2H15: O.V.E.R.
II. Key themes and issues: O.V.E.R.
Sector keyword:
O.V.E.R.
• Telecom sector keyword for 2H15: O.V.E.R.
• O: Opportunity – New opportunities in the mobile-only age
• V: Velocity – The battle for speed continues with 5G
• E: Encouragement – Encouraging consumers to use more data to improve ARPU
• R: Regulation – The importance of regulations and policy direction
The opportunities and threats of
the mobile-only age
TIP

Telecom
Service
2H15 Outlook 17
Source: Bassendean Means Business, KDB Daewoo Securities Research
In the mobile-only age, new charging schemes are emerging
II. Key themes and issues: Opportunity
1) Opportunity: Charging
schemes are diversifying
• Opportunity: New opportunities in the mobile-only age
• Age of connectedness (via mobile devices) has brought more monetization opportunities to telcos
• B2B: Charging service providers, not users, for data
• B2C: Through platform business, telcos can charge for both network and service use
Network value is maximizing
Charging service
providers (i.e.,
companies), not
service users, for data
Platform business:
Charging for
network + service usage
simultaneously
TIP

Telecom
Service
2H15 Outlook 18
Source: SK Telecom, KDB Daewoo Securities Research
Telcos’ IoT-related revenue sources to diversify from network to platform/solution/devices
1) Opportunity: IoT • Telcos need to diversify IoT-related businesses
• Currently, hardware accounts for 93% of the IoT market, while mobile network revenue is
insignificant
• After 10 years, hardware, system, and service/applications are projected to account for 37%, 30%,
and 30% of the IoT market, respectively; Mobile network is projected to take up just 3% due to the
development of device-to-device (D2D) technology
Mobile network accounts for
just a minor proportion of the
IoT market
Hardware, system, and
service/applications segments
will expand further
TIP
Connectivity
Convergence
Intelligence
Network + Device
Open Platform
Market cultivation
Solutions-based
business transformation
Valuable, intelligent
business
Sensing + Big Data
Traditional
telecom service
Expansion

Telecom
Service
2H15 Outlook 19
Source: Media reports, company data, KDB Daewoo Securities Research
Major telcos’ IoT-based smart home services
1) Opportunity: IoT
partners are expanding
• Telcos are expanding partnerships with consumer goods companies for the IoT business
• SK Telecom: Cooperating with home appliance SMEs for its IoT platform Mobius
• KT: Focusing on healthcare services targeting middle-aged and older customers; GIGA Internet
• LG Uplus: Specializing in home appliance control services through cooperation with LG Electronics
Telcos are expanding the IoT
business through partnerships
TIP
SK Telecom KT LG Uplus
Launched
- Door locks (iRevo)
- Dehumidifier (Winix)
- Boiler (KyungDong Navien)
- Gas shut-off device (Time Valve)
- Pet services (Petfit, T-Pet)
- Giga Home Fitness
- Yodac (adult disease screening)
- Safe Zone
(children/elderly)
MomCa 2 (home CCTV)
Uplus GasLock
To be
launched
- Boiler (Rinnai, Daesung Celtic,
Altoen Daewoo)
- Air purifier (Winia, Winix,
Tongyang Magic)
- Lighting
(Kumho Electric, GE Lighting)
- Smart outlet
(DS Tech, Powervoice)
- Smart switch (Bandi Tongsin)
- Range hood (Haatz)
- Water purifier (Kyowon Wells)
- Security services
- Smart air care (Coway)
- Open home IoT platform
- Time Valve Smart
(Time Valve)
- U-Safe Alarm
(for the elderly)
- Uplus Switch
- Uplus Plug
- Uplus Energy Meter
- Uplus Doorlock
- Uplus Thermostat
(Kiturami Boiler)
- Uplus Open Sensor
- Home Chat
Emphasis
Based on SK TelecomÊs IoT platform
Mobius
Targeting middle-aged and older
customers; Focus on healthcare
Cooperating with LGE;
Home appliance control services

Telecom
Service
2H15 Outlook 20
Source: MISP, KDB Daewoo Securities Research
Telcos’ device manufacturing to strengthen competitiveness of new and base industries
1) Opportunity: Telcos’
handset production
• The Ministry of Science, ICT, and Future Planning (MSIP) plans to allow telcos to
manufacture telecom devices without needing approval
• The plan was among the major ICT-related regulatory tasks formulated by the Information and
Communication Strategy Committee in May
• SK Telecom invested an additional W30bn (CB and rights offering) in subsidiary iRiver last Dec.
• SK C&C established an IT service JV with Hon Hai Group and plans to continue the cooperation
MSIP will revise Article 17 of
the Telecommunications
Business Act, which mandates
that telcos receive ministry
approval to manufacture
telecom devices
Such regulations do not exist
overseas and are thought to
disadvantage telcos
Growth
Competitiveness
Target niche markets
New business
Strengthen competitive advantage
Ensure next-generation
competitiveness
New business
Foundation business Foundation business
Maintain competitive advantage
Big data
Cloud service
Wearable device
Game (mobile)
Mobile phone
(Smart phone)
Display
Memory
PC
(inc. tablet PC)
Broadcasting device
(TV)
Telecom service
IT service
Sensor
Non-memory
Infra SW
Network equipment
Broadcasting service Applied SW
Production
convergence
Medical convergence
Educational convergence
Financial
convergence
Digital content
IoT service
Information protection
Printer
TIP
Broadcasting
equipment
Server 1

Telecom
Service
2H15 Outlook 21
Government’s frequency policy: Mobile Gwanggaeto Plan 2.0
II. Key themes and issues: Velocity
2) Velocity: Frequency, a
requirement for higher
speed
91KCC’s tax revenue is
projected to decrease
W157.2bn YoY to W1.044tr in
2016 due to
1) a decline in penalty income
after the implementation of the
Handset Distribution Act, and
2) a drop in frequency fees
(frequency auction was delayed
from 2H15 to 1H16)
• Frequency is the most important requirement for higher speed
• 700MHz: Broadcasters vs. telcos
• 2.1GHz: SK Telecom vs. KT; Used for 3G; Licenses are set to expire in 2016
• 2.5GHz and 2.6GHz: Government to allocate the spectrum to a fourth telecom operator; FDD as
well as LTE-TDD to be allowed
Notes: FDD and TDD refer to frequency division duplex and time division duplex, respectively; WRC refers to World Radiocommunication Conference; ‘a’ in the
1st phase for 700MHz is the spectrum that could be additionally allocated for mobile communication after consultation with the KCC
Source: MSIP, KDB Daewoo Securities Research
TIP
Category
Potential ranges to be secured (MHz)
TotalSecured
(allocated in
2013)
First (-2015) Second (-2018) Third (-2020)
Fourth
(-2023)
Addition Refarming Addition Refarming Addition Refarming Addition
FDD
700MHz 40 a 40+a
1.8GHz 60 (30) 20 100 (30)
2.1GHz 60 60 120
2.6GHz 80 (40) 20 10 110 (40)
TDD
2.0GHz 40 40
2.3GHz 30 40 70
2.5GHz 40 40
FDD/TDD 3.5GHz 160 160
WRC additional
distribution
range
Below 6GHz Min 200 Min 200
Above 7GHz Min 500 Min 500
Total
180 (70) 60+a 290 220 510
Addition
1260MHz+a
60 40 20
Refarming
120MHz

Telecom
Service
2H15 Outlook 22
Government’s frequency auction (delayed to 1H16): Four spectrum packages
2) Velocity: Frequency
auction plan
Frequency auction:
- Revenue for the government
- Reallocation according to usage
- ICT growth to be affected
• Frequency auction is scheduled for early 2016; SK Telecom and KT likely to participate
• So-called “golden frequency” to be auctioned; Four spectrum packages below 3GHz
• Total allocation of 60MHz in the 2.6GHz band, 100MHz in the 2.1GHz (SK Telecom and KT) band,
and 20MHz in the 1.8GHz band
• Auction for 40MHz in the 700MHz band to be delayed due to the National Assembly’s slow
progress on the issue
Note: Mobile Gwanggaeto Plan 2.0
TIP

Telecom
Service
2H15 Outlook 23
Notes: Upstream frequency ranges for communication (740-752MHz) are currently used by wireless microphones and will be available after 2021;
“Spare” entries marked with an asterisk indicate ranges that have been prepared for broadcasters to use
Source: MSIP, news reports, KDB Daewoo Securities Research
Government’s 700MHz allocation plan: 20MHz for disaster communication network, 40MHz for mobile
communication, 24MHz for broadcasting
2) Velocity: Competition
for frequency
Broadcasters and telcos need
additional frequency spectrum
for UHD broadcasting and
growing mobile data traffic,
respectively
In foreign countries, telcos had
an upper hand in the 700MHz
allocation
Recently, Germany
preemptively auctioned off
700MHz for mobile
communication to prepare for
the launch of 5G technology
• 700MHz: Broadcasters and telcos are competing
• Broadcasters: Asking for entire remaining spectrum for terrestrial UHD broadcasting
• Telcos: Asking for at least 40MHz in preparation for a surge in mobile data traffic
• Competition has intensified after the government allocated 20MHz for national disaster safety
communication network; Concerns about spectrum fragmentation
TIP
Current:
Government proposal:
Spare range (108MHz)
For telcos For telcos
Spare* Spare*
2 terrestrial channels 2 terrestrial channels National disaster safety
comm. network
National disaster safety
comm. network(MHz)
Spare*
Temporary band
for DTV conversion

Telecom
Service
2H15 Outlook 24
Notes: Numbers in parentheses in the 2.1GHz row indicate spectrums refarmed to LTE services
Frequency licenses of three telcos
2) Velocity:
Note frequency usage
periods
2.1GHz band to be reallocated
via auctions
• 2.1GHz: SK Telecom vs. KT; Licenses to expire in 2016
• In September 2014, the government approved 2.1GHz refarming for LTE.
• As such, SK Telecom and KT currently use 20MHz (in the 2.1GHz band) for LTE services
• MSIP plans to withdraw a total of 100MHz in the 2.1GHz band, and then reallocate 40MHz-wide
spectrums
TIP
Category SK Telecom KT LGU Total
Expiry
(Period of utilization)
2G
800 10
30
June 2021
(10 years)
1.8GHz 20
3G 2.1GHz
60
(40)
40
(20)
100
December 2016
(15 years)
LTE
800 20 10 20
200
June/December
2021
(8-10 years)
900 20
1.8GHz 35 35
2.1GHz (20) (20) 20
2.6GHz 40
WiBro 2.3GHz 30 30 60
March 2019
(7 years)
Amount of frequency held 155 135 100 390

Telecom
Service
2H15 Outlook 25
2.3GHz range: Existing WiBro (2,300-2,390MHz)
2.5GHz range: New WiBro (2,575-2,615MHz)
SK Telecom
Not allocated
WLAN
Source: KISDI, KDB Daewoo Securities Research
Breakdown of frequency bands; Fourth carrier to be able to choose between WiBro and LTE-TDD in 2.5GHz
2) Velocity: Entrance of
fourth carrier
The fourth carrier will be able to
utilize available frequency band
for LTE-TDD, etc. in addition to
WiBro
LTE-TDD (time division duplex):
The same frequency band is
used for data transmission and
receipt
LTE-FDD (frequency division
duplex): Separate frequency
bands are used on the
transmitter and receiver sides;
Korean telcos use this
technique
• 2.5GHz and 2.6GHz to be allocated to the fourth carrier (both LTE-TDD and FDD allowed)
• Originally, only 2.5GHz (40MHz-width) was approved for WiBro (LTE-TDD to be added)
• 2.6GHz (40MHz-width) will also be approved this year (LTE-FDD technique to be allowed)
• The broadening of the spectrum seems intended to facilitate the entrance of a new carrier
LTE-TDD 40MHz LTE-FDD 40MHz
TIP

Telecom
Service
2H15 Outlook 26
Aggregating carriers
within similar
operating frequency
(LTE range)
Aggregating carriers
operating in different frequencies
(licensed & non-licensed ranges)
Broadband LTE
Source: SK Telecom, Qualcomm, 5G Forum, KDB Daewoo Securities Research
LTE-Advanced: CA enhances data speed
2) Velocity: Carrier
Aggregation
Advancement of CA
technology:
Aggregating component
carriers helps increase peak
data rate
Before CA, MC (multi-carrier)
technology was in the spotlight;
this technology enables one to
find a faster network, but does
not increase the peak data rate
• LTE-Advanced: Steady increase in carrier aggregation (CA)
• CA technology aims to increase network speeds by aggregating two or more frequency bands
• Currently, the CA technology used in LTE-Advanced can aggregate two bands
• Going forward, a technology combining three or more bands, or combining LTE and Wi-Fi
frequency bands, is anticipated to be commercialized
TIP

Telecom
Service
2H15 Outlook 27
5G vision
2) Velocity: Bracing for 5G
mobile networks
5G preparations:
Domestic: 5G Forum, in which
three telcos as well as
Samsung Electronics and LG
Electronics participate
Japan: NTT Docomo R&D
Center
China: IMT-2020 (5G)
promotion group
UK: 5G Innovation Centre
• 5G technology targets in Korea: Demonstration in 2018, commercialization by 2020
• Vision: 1Gbps, hyper-connectivity, and immersive experiences
• Standardization not yet completed  Network investments (capex) not yet begun
Source: 5G Forum, KDB Daewoo Securities Research
TIP

Telecom
Service
2H15 Outlook 28
Notes: Media reports; Details released on May 27th
MSIP’s vision for the PyeongChang 2018 Olympics
2) Velocity: Year 2018
MSIP plans to build the K-ICT
Olympics Export Strategy
Complex to test/verify ICT
services to be provided during
the Olympics (funding by 2018:
W109.5bn from the
government, and W76.8bn from
the private sector)
• MSIP has presented its ICT Olympics vision for 2018 (PyeongChang Olympics)
• Provide ICT services and products for the successful hosting of the Olympics
• Demonstrate 5G, IoT, UHD, etc. to help increase exports
• Capex likely to increase around 2018 due to 5G network demonstration
K-ICT Olympics: Demonstrate speed and convenience
5G network IoT services UHD broadcast
• 5G network
demonstration
• 5G-based immersive
media
• Gigabyte Wi-Fi zone
• Personalized services
• Intelligent traffic system
and disaster prevention
• Games support
• 4K, 8K UHD broadcast
• Personal, social media,
etc.
• Multiplanar image
system demonstration
Export ICT services/products to other hosting countries
TIP

Telecom
Service
2H15 Outlook 29
Source: Dentsu, Creative Multiplier, KDB Daewoo Securities Research
Business trend leaders: Those with the ability to drive lifestyle changes
II. Key themes and issues: Encouragement
3) Encouragement:
Evolution of customer
management strategies
• Encouragement: Detailed strategies are required to manage customers, who are sensitive to
telecommunications expenses
• In modern times, companies that are able to transform people’s lifestyles (on top of developing innovative
technologies) drive business trends
• Advertising, products, sales capacity, branding, businesses, and strategic promotions are increasingly geared
toward influencing customers’ environments
• Telecom services require comprehensive and well-balanced strategies, given the importance of both
customer acquisition and retention
Strategic moves to handle
sensitive consumers
TIP
광고부 상품기획부 사업부 브랜드 경영실 경영기획부 IR실 CSR 추진실
Advertising
power
Product
power
Total
sales
capacity
Brand
power
Business
planning
Power
Strategic
marketing/
public
relations
power
Company
environment
power
1980s 1990s 2000s 2010s
Advertising Product
planning
Sales Brand
management
Planning IR CSR

Telecom
Service
2H15 Outlook 30
Source: Connecting Lab, company data, KDB Daewoo Securities Research
Data plan diversification
3) Encouragement: A push
for higher ARPU
• New monthly plans have been launched in 2Q every year since the introduction of LTE
• New monthly plans focus on providing greater convenience to customers (and raising ARPU)
• Data plans are increasingly differentiated by service and smartphone model
• Differentiation by time, place, and occasion is also evident
Data plan diversification apart
from volume:
1) Differentiated by service and
smartphone model;
2) Optimized for time, place,
and occasion;
3) Able to charge more parties
(indirect users, businesses,
etc.)
Charging party: Sponsors
(shopping, games, cab apps, etc.)
Age: Kids, youth, etc.
Time: Unlimited data for specific time zone, etc.
Place: Subway, etc.
Data plans (mostly volume-based)
By time
By service
By volume
By smartphone
Charging
party
Cloud
Multi-tier
TIP
By data volume
By service
By device

Telecom
Service
2H15 Outlook 31
Note: A survey of more than 1,000 CIOs, COOs, and CMOs conducted by Accenture; A game changer is a newly introduced element or factor that changes an
existing situation or activity in a significant way
Source: Accenture, CIO Insight, Google, KDB Daewoo Securities Research
Efficient data collection opportunity is a game changer
3) Encouragement:
Data on customer
behavior
• Staying connected to customers  Game changer
• Telcos can identify consumers’ mobile life patterns
• Note opportunities that big data can create
• SK Telecom utilized the data usage patterns of its subscribers to launch a new plan, Band
Timefree
Ample potential for application of big
data
Areas in which big data will have a
significant impact within 5 years,
according to survey respondents:
- Transforming customer
relationships: 63%
- Redefining product development:
58%
- Overhauling organizations’
operations: 56%
59%
Big data
is a big asset
79%
Big data is
important to
competitiveness
89%
Big data will
play a role as a
game changer
83%
Big data is used
for corporate
competitiveness
TIP

Telecom
Service
2H15 Outlook 32
II. Key themes and issues: Regulations
4) Regulations: Pressure
has persisted
• Regulations: Regulations and policy direction are key
• Reduction in household telecom bills is a top priority for government
• In line with the president’s campaign pledge, the government has repealed the sign-up fee, while
implementing MVNO promotion policies
• In addition, the government has increased policies to facilitate competition since the introduction of
the handset distribution act
Source: Statistics Korea, BOK, KDB Daewoo Securities Research
Government efforts to reduce mobile service charges
Proportion of telecom expenses in gross
national consumer expenditure
Source: Media reports, KDB Daewoo Securities Research
0
1
2
4
5
6
0
150
300
450
600
750
70 75 80 85 90 95 00 05 10 15F
(%)(Wtr)
Domestic household final consumption expenditure (L)
Proportion of telecom expenses (R)
Date Details
May 2013
- MSIP announced plan to reduce household spending on communication
services and to vitalize the MVNO market
August 2013 - 40% decrease in sign-up fee (W26,000 →W21,600)
August 2014 - 50% decrease sign-up fee (W21,600 →W10,800)
October 2014
- Eliminated sign-up fee (W10,800→free)
- Handset distribution law went into effect; Applied discount rate of 12% on
monthly charge for customers not receiving subsidies
April 2015 - KCC increased the discount rate to 20% for customers not receiving subsidies
May 2015
- GovernmentÊs cut to network wholesale prices; Revitalization of the
MVNO market;
- Announcement of plans to cut household telecom expenses
June 2015
- Public hearing on the promotion of competition in the mobile telecom
market
- Efforts to overhaul strict government oversight of rate plan
adjustments
- Seeking to introduce a fourth mobile operator

Telecom
Service
2H15 Outlook 33
Timeline of plan to allow a fourth mobile service provider
4) Regulations: Allowing a
fourth mobile service
provider
• The MSIP has announced a basic plan for issuing a license to a facilities-based
telecommunication business operator according to the revised Telecommunications
Business Act
• As such, a regulatory environment for allowing a fourth mobile service provider has been created
• Bandwidths available to a new player: TDD 2.5GHz and FDD 2.6GHz (40MHz each)
• A public hearing will be held on June 9th and public opinions gathered until June 11th; License
applications will be accepted starting end-August
The aim of the plan is to benefit
subscribers and promote
investments by facilitating
competition
TIP
June 2015
End-Aug.
to end-Sept. 2015
Oct. 2015 Nov. to Dec. 2015 Mar. 2016 2017
Announcement of
basic plan for
licensing a facilities-
based telecom
business operator
Frequency allocation
notice; Business
license applications
(including frequency
application)
Review of applicantsÊ
qualifications;
Notification of results
Review of business
plans;
Selection of fourth
operator
(including frequency
allocation review)
Payment for frequency
allocation; Issuance of
business license
Launch of fourth
telcoÊs services

Telecom
Service
2H15 Outlook 34
Past applications for a fourth mobile service license: KMI applied and failed each time
provider
• Applications for a fourth mobile service license were submitted on six past occasions
• KMI applied each time, and IST applied twice
• All applicants were unqualified, mainly due to non-transparent financing plans and inadequate
business plans
• Introduction of new technologies, including LTE-TDD, was an important part of the evaluation
criteria recently
All past applicants have not
been qualified
TIP
1st
June 2010
2nd
Nov. 2010
3rd
Aug. 2011
4th
Oct. 2012
5th
Nov. 2013
6th
Mar. 2014
7th
Aug. 2015
Applicant:
KMI
Result: Unqualified
Reasons:
Inadequate
financial/
technological
capabilities
Applicant:
KMI
Result: Unqualified
Reasons:
Non-transparent
financing plan;
Too-optimistic
demand forecast
Applicants:
KMI, IST
Result: Unqualified
Reasons: Weak
shareholding
structuring;
Inadequate
financial capability;
Non-transparent
financing plan
Applicants:
KMI, IST
Result: Unqualified
Reasons:
Inadequate
business plan
Applicant:
KMI
Result: Withdrew
voluntarily
Reasons:
Inadequate plan for
payment for
frequency
allocation
Applicant:
KMI
Result: Unqualified
Reasons: Non-
transparent
financing/
business plan
Applicant(s):
TBD
Result:
(to be announced
at year-end)

Telecom
Service
2H15 Outlook 35
provider
• The government’s move to allow a fourth mobile service provider is aimed at overhauling the market structure
by increasing competition
• Current market structure (three mobile operators) will likely provide no incentive for competition and increase
household telecom expenses
• The government has rationalized regulations to lay the foundation for a new player to enter the market
• The government appears to be benchmarking France’s telecom policies: MVNO and a fourth mobile
service provider
Notes: As of early June
Subscriber base and market share of Free Mobile, the fourth
mobile operator to receive a license in France
Potential applicants for fourth mobile service license
Notes: Market share is in parentheses
Source: Free Mobile, KDB Daewoo Securities Research
0
5
8
10
11
0
2
4
6
8
10
12
1/12 12/12 12/13 12/14 12/15
(mn persons)
No. of subscribers
(Introduction)
(8%)
(12%)
(15%)
(15.5%)
Consortium Representative
KMI
Jong-nyeol Gong
(Former director of MOIC)
IST
Seung-taek Yang
(Former minister of MOIC)
Woori Telecom
Yun-sik Jang
(Former president of the MVNO
association)
Quantum Mobile
Seong-do Park
(Former vice-president of Hyundai
Mobis)
K Consortium
Dang-yeong Lee
(from Samsung Electronics)

Telecom
Service
2H15 Outlook 36
Notes: Mobile charges are based on mobile network operators (MNOs) with a market share of more than 5%, excluding MVNOs
Source: GSMA Intelligence, KDB Daewoo Securities Research
EU: Mobile charge comparison of three-MNO vs. four-MNO markets
4) Regulations: Overseas
cases of a fourth mobile
service provider
• Effects of a fourth mobile service provider need further monitoring
• France: Free Mobile entered the market with a 12-year rate plan, triggering industry restructuring
amid intense competition
• Japan: Y!mobile had a market share of less than 3% for six years after launching its services;
Company was acquired by Softbank this year
• EU: Minimal mobile charge differences between three-player vs. four-player market structures
France’s Free Mobile saw its
market share rise up to 15%
after its entry into the market.
However, intensified
competition led to decreased
revenue and profits at mobile
operators, triggering industry
restructuring. MVNOs’ market
shares also contracted
Japan’s Y!mobile recorded a
market share of 2.8% for seven
years after its market entry. As
the company was acquired by
Softbank this year, the
Japanese market has returned
to a three-player structure
TIP
0.22
0.21
0.07
0.00
0.05
0.10
0.15
0.20
0.25
0.30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(EUR/min.)
3-player markets
4-player markets

Telecom
Service
2H15 Outlook 37
Note: The “regulatory guillotine” approach refers to efforts to revamp inefficient and unpractical regulations all at once.
Source: Prime Minister's Office, KDB Daewoo Securities Research
Repeal of rate plan approval system: Part of the “regulatory guillotine” approach discussed
at a public-private meeting in end-2014
4) Regulations: Repeal of
rate plan approval system
• Rate plan approval system: Currently, rate plan adjustments by dominant telcos are subject to
approval; the purpose is to ensure steady revenue for second-tier firms by preventing dominant
players from pushing through excessive rate cuts
• The proposed repeal could promote rate cut competition, better protecting consumer rights
• The Ministry of Science, ICT and Future Planning plans to hold a public hearing in June to come up
with non-legislative solutions
Proposed repeal is intended to
reduce cost of telecom plans by
promoting rate competition
Since 2010, all telcos have
been subject to a reporting
system for rate cuts; for rate
hikes, the rate plan approval
system still applies
TIP
Agenda number Agenda Details
81
Repeal of rate plan
approval system
▪ For SK TelecomÊs mobile services and KTÊs local call services, rate hikes or
new plans are subject to approval
 Need to ease competition-stifling regulations (such as by repealing
rate plan approval system)
Authorities Details
Non-legislative
Ministry of Science,
ICT and Future Planning
[Solution]
▪ Comprehensive measures to facilitate market competition to be
presented (not only scrapping the rate plan approval system, but also
stimulating telecom market competition, revamping wholesale systems,
and improving MVNO competitiveness; public hearing slated for June).
* Discussions among legislators, government officials, and private
professionals being held

Telecom
Service
2H15 Outlook 38
Source: National Assembly, KDB Daewoo Securities Research
Major proposals related to MCTDSIA revisions
4) Regulations: Mobile
Communications Terminal
Distribution Structure
Improvement Act
(MCTDSIA)
• Telecom-related bills, including MCTDSIA, will be discussed by the National Assembly in June
• Both the ruling and opposition parties moved to repeal the ceiling and floor for handset subsidies
• The opposition party proposed to completely separate mobile phone sales and service plans
• However, there are many pending issues facing the National Assembly, including a confirmation
hearing for a prime minister nominee and revisions to the National Assembly Act
Matters under discussion
related to MCTDSIA revisions:
Repeal of ceiling for handset
subsidies, complete separation
of mobile phone sales from
service plans, etc.
TIP
Date Author of proposal Bill details
8/19/2014 Byung-heon Jeon (NPAD) Repeal of strict government oversight of rate plan adjustments
10/14/2014 Min-hee Choi (NPAD)
Introduction of a scheme requiring separate disclosure from telcos
and handset makers concerning subsidies and sales incentives
10/17/2014 Deok-gwang Bae (Saenuri)
Scrapping of subsidy cap;Introduction of a scheme requiring separate
disclosure from telcos and handset makers concerning subsidies and
sales incentives
11/7/2014 Myeong-suk Han (NPAD)
Scrapping of subsidy cap;Introduction of a scheme requiring separate
disclosure from telcos and handset makers concerning subsidies and
sales incentives; Differentiating subsidy payment by subscription type
11/10/2014 Jae-cheol Shim (Saenuri)
Scrapping of subsidy cap;Report to the KCC before changing
disclosures
3/12/2015 Byung-heon Jeon (NPAD)
Repeal of the handset distribution law;Complete separation of mobile
phone sales and service plans under the revised telecommunications
business act

Telecom
Service
2H15 Outlook 39
Source: KPCB, KDB Daewoo Securities Research
Currently, regulatory pressures are too strong; Business structure needs to evolve
through innovation
4) Regulations: Business
structure needs to evolve
• Conventional business structure: Tight tensions between regulations and innovations
• Currently, regulatory pressures are strong, and companies and consumers are sensitive to policy
direction
• In the future, companies will pursue innovation through active interactions with consumers, who are
savvy about mobile devices and social media; Authorities’ main role will be support and monitoring
Currently, both companies and
consumers are sensitive to
policy direction
Companies are moving toward
innovation through active
interactions with consumers,
who are savvy about mobile
devices and social media
TIP
Regulation
(Past)
Incumbent
Innovation
Regulation
(Present)
Incumbent
Innovation
Company
Consumer
Company
Consumer
(Evolving direction)
Incumbent
Innovation
Regulation
Company
Consumer

Telecom
Service
2H15 Outlook 40
2015: Regulations will likely be the most influential factor affecting telecom shares
Determinants of telecom
shares: Regulations, capex,
earnings, and dividends
• Telecom share prices are affected by regulations, capex, earnings, and dividends
• The telecom industry requires investments in both tangible and intangible infrastructure; Less capex tends to
lead to profit growth
• Earnings are linked to regulations and capex: Earnings likely to normalize through 2015
• Dividends are linked to earnings; Expect dividend payout ratio to grow this year
• 2015: While capex, earnings, and dividends are favorable, the regulatory environment is not
Not all share determinants likely
to be favorable in 2015
TIP
Regulations
Capex Earnings
Dividends

Telecom
Service
2H15 Outlook 41
Overblown concerns to
provide investment
opportunities
• Telecom stocks tend to recover after pulling back on regulatory risks
• Before the MCTDSIA took effect, the subsidies issue drove down shares
• With the handset distribution environment changing, issues such as phone bills and the emergence
of a fourth telco are sending shares down
• Once a clearer picture of the policy landscape emerges in 3Q, downward pressures should ease
Notes: Average of PC and mobile search frequencies for keyword “subsidy”
After MCTDSIA: Shares being affected by issues such as
telecom expenses and potential fourth telco
Before MCTDSIA: Shares affected by subsidy competition
Notes: Average of PC and mobile search frequencies for keywords “phone bill” and “fourth telco”
0
20
40
60
80
100
37
39
41
43
45
47
49
51
6/14 9/14 12/14 3/15 6/15
(max=100)(p)
FTSE Korea Telecom Index (L)
'Phone bill' search frequency (inverted, R)
'Fourth telco' search frequency (inverted, R)
0
20
40
60
80
100
35
37
39
41
43
45
47
49
51
1/14 4/14 7/14 10/14 1/15
(max=100)(p) FTSE Korea Telecom Index (L)
'Subsidy' search frequency (inverted, R)

Telecom
Service
2H15 Outlook 42
Regulatory risks to be offset by time and dividends; New businesses to boost enterprise value
Time, dividends, and new
businesses
• Regulatory risks could be offset by the following factors:
• Time: It will likely take time to review potential effects of new policies before actual implementation
• New businesses: Overseas exports and expansion of jobs should boost enterprise value
• Dividends: High dividend yields are likely to provide downside support
Once regulatory risks ease,
shares should reflect
fundamentals
Regulatory
risks
Fundamentals + improved
enterprise value
• Better margins of existing
businesses
• New businesses to boost
growth potential
TIP

Telecom
Service
2H15 Outlook 43
SK Telecom’s 12-month forward P/B
Earnings outlook and valuation of major telcos (Wbn, %, x)
KT’s 12-month forward P/B
Note: Based on our estimates for Korean firms and the consensus for the others, Source: Bloomberg, KDB Daewoo Securities Research
III. Valuation & investment strategy: Global peer group
Company
Revenue (Wbn) OP (Wbn) NP (Wbn) OP margin (%) P/E (x) P/B (x) ROE (%)
14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F 14 15F 16F
SK Telecom 17,164 17,752 18,361 1,825 1,967 2,188 1,801 1,972 2,159 10.6 11.1 11.9 12.0 10.3 9.4 1.3 1.1 1.0 12.9 13.0 13.1
KT 23,422 22,021 22,015 -292 1,158 1,192 -1,055 1,127 647 -1.2 5.3 5.4 - 6.8 11.9 0.7 0.6 0.6 -9.5 10.3 5.5
LG Uplus 11,000 10,545 10,700 576 692 709 228 368 394 5.2 6.6 6.6 22.0 11.2 10.5 1.2 0.9 0.9 5.6 8.5 8.5
NTT Docomo (Japan) 42,429 40,318 41,785 6,186 6,061 6,678 3,969 4,103 4,558 14.6 15.0 16.0 22.9 19.6 17.3 1.7 1.6 1.6 7.4 8.3 8.8
Softbank 83,923 80,162 83,174 9,512 9,390 10,623 6,469 4,533 5,860 11.3 11.7 12.8 13.0 17.0 13.2 3.0 2.6 2.2 27.8 16.2 17.4
China Mobile (China) 109,678 121,149 127,310 20,693 21,705 23,181 18,685 19,806 21,134 18.9 17.9 18.2 15.0 15.1 14.0 1.9 1.8 1.7 13.3 12.4 12.3
China Unicom 48,676 52,199 54,318 3,580 3,801 4,381 2,061 2,466 2,849 7.4 7.3 8.1 21.6 18.7 16.1 1.1 1.1 1.0 5.3 5.9 6.7
PCCW (HK) 4,520 5,550 5,844 548 771 857 450 365 423 12.1 13.9 14.7 10.5 13.4 12.0 3.5 3.0 2.8 34.2 22.4 23.3
Singtel (Singapore) 14,183 14,403 14,837 2,405 2,466 2,590 3,114 3,265 3,497 17.0 17.1 17.5 17.3 16.6 15.5 2.6 2.5 2.4 15.6 15.5 16.0
AT&T (US) 139,510 149,607 154,161 12,372 25,620 26,424 6,556 14,609 15,205 8.9 17.1 17.1 14.2 13.7 13.3 2.1 2.1 2.0 6.5 15.2 16.4
Verizon 133,856 145,985 147,688 20,644 32,683 33,350 10,138 17,249 17,782 15.4 22.4 22.6 13.4 12.3 11.9 20.6 12.7 8.6 89.8 122.5 82.5
Deutsche Telekom (EU) 87,625 84,610 86,176 10,135 9,587 10,613 4,089 4,131 4,770 11.6 11.3 12.3 37.2 21.8 18.5 2.5 2.5 2.4 7.2 10.8 12.8
Orange 55,162 48,842 48,963 7,150 7,393 7,479 1,294 3,077 3,291 13.0 15.1 15.3 34.5 14.8 13.8 1.2 1.3 1.2 3.4 9.0 9.3
Average 11.1 13.2 13.7 19.5 14.7 13.6 1.9 1.8 1.6 10.8 12.3 12.5
20,000
25,000
30,000
35,000
40,000
45,000
50,000
10 11 12 13 14 15 16 17
(W) Adj. stock price
1.1x
0.9x
0.8x
0.7x
0.6x
100,000
150,000
200,000
250,000
300,000
350,000
10 11 12 13 14 15 16 17
(W)
Adj. stock price 1.3x
1.2x
1.0x
0.8x
0.7x

Telecom
Service
2H15 Outlook 44
IV. Top pick & stocks to watch
Telecom Service
(Overweight)
KT (Buy)
LG Uplus (Buy)
Earnings recovery, dividend payout, stock buyback
2H point: Shareholder-friendly measures to come
Value of subsidiaries: SK Planet, SK Broadband,
SK Hynix, etc.
Earnings normalizing thanks to cost decline
following massive restructuring in 2014
2H point: Potential dividend payout
High ARPU: High contribution of LTE subscribers
2H point: Steady subscriber acquisition
Dividend payout ratio of 30%
Operations normalizing:
Swung to a net subscriber addition in 2Q;
First telco to release data-oriented plans

Telecom
Service
2H15 Outlook 45
SK Telecom (017670 KS)Top pick
Shareholder returns to increase
Investment points
• Strong shareholder return policy: Plans for both dividend payment and treasury share purchase
• Earnings recovery: Weak in 1H due to restructuring; Recovery to come in 2H
• EV: Earnings growth and EV improvement at major subsidiaries, including SK Planet, SK
Broadband, and SK Hynix
• Platform business: Businesses with high growth potential (media, commerce, and IoT) to be
emphasized
Risks
• As the market leader, sensitive to regulatory and policy environment; Need to defend subscriber
base
• Uncertainties related to ownership structure changes in SK Group
Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to
controlling interests; Based on June 9th
closing price
FY (Dec.) 12/12 12/13 12/14F 12/15F 12/16F 12/17F
Revenue (Wbn) 16,141 16,602 17,164 17,752 18,361 18,934
OP (Wbn) 1,730 2,011 1,825 1,967 2,188 2,242
OP margin (%) 10.7 12.1 10.6 11.1 11.9 11.8
NP (Wbn) 1,152 1,639 1,801 1,972 2,159 2,201
EPS (W) 14,263 20,298 22,307 24,427 26,739 27,263
ROE (%) 9.8 13.0 12.9 13.0 13.1 12.2
P/E (x) 10.7 11.3 12.0 10.3 9.4 9.2
P/B (x) 0.9 1.2 1.3 1.1 1.0 1.0
(Maintain) Buy
Target Price (12M, W) 360,000
Share Price (6/9/15, W) 251,500
Expected Return 43%
OP (15F, Wbn) 1,967
Consensus OP (15F, Wbn) 1,940
EPS Growth (15F, %) 9.5
Market EPS Growth (15F, %) 36.9
P/E (15F, x) 10.3
Market P/E (15F, x) 10.5
KOSPI 2,064.03
Market Cap (Wbn) 20,308
Shares Outstanding (mn) 377
Free Float (%) 62.6
Foreign Ownership (%) 44.5
Beta (12M) 0.77
52-Week Low 219,000
52-Week High 301,000
(%) 1M 6M 12M
Absolute -1.9 -10.5 14.8
Relative -0.9 -14.5 10.7
80
90
100
110
120
130
14.6 14.10 15.2 15.6
SK Telecom KOSPI

Telecom
Service
2H15 Outlook 46
SK Telecom’s plans related to shareholder returns
• Both dividend payment and treasury share purchase expected
• Interim dividend: Announcement expected in June; Payment in July
• Annual dividend: If interim dividend plans are changed, an announcement on the annual dividend
plan can also be expected
• Treasury share purchase: SK Telecom is likely to buy back shares used in the acquisition of SK
Broadband and allocate a separate budget for shareholder returns
Shareholder-friendly policies to
be strongest in 4Q following
dividend payment and treasury
share purchase
Notes: KDB Daewoo estimates
Dividend and treasury
shares
Dividend
Plan to pay
out year-end
dividend
Treasury
stock
Start to buy
back shares
Dividend
Plan to pay
out interim
dividend
July September Year-end
1H:
- Restructuring
- Decrease in earnings
- Concerns about
regulations
2H:
- Earnings recovery
- Increase in dividend
- Share buyback
TIP

Telecom
Service
2H15 Outlook 47
SK Group’s ownership structure after merger of SK C&C and SK Holdings
• SK C&C and SK Holdings to merge on August 1st
• SK Telecom leads SK Group’s ICT businesses
• Under SK Group’s growth strategy, SK Telecom is included in the portfolio of traditional
businesses; SK Group to strengthen the management of the company
• SK Telecom’s subsidiary SK Hynix belongs to the portfolio of new growth businesses; Group’s
investment in SK Hynix to increase
Investors need to pay close
attention to changes in
ownership structure
Group ownership
structure and growth
strategy
TIP
SK Holdings
SK C&C
SK Holdings
SK Innovation SK Telecom SK Networks
SK E&C
SK Shipping
SK Securities
SK Biopharm
Infosec
ESSENCORE
SK E&S
SKC
SK Planet
SK Broadband
SK Hynix
SK Energy
SK Global
Chemical
Energy/Chemicals ICT/Semiconductor Marketing/Services
SK Group holds:
KoreaÊs top oil refinery
KoreaÊs top mobile service provider
WorldÊs no. 2 DRAM producer
SK Lubricants
SK Incheon
Petrochemical
Before
merger

Telecom
Service
2H15 Outlook 48
SK Telecom likely to restructure its businesses
• The group's growth strategy should boost SK Telecom’s enterprise value; In particular, SK
Group will:
• Strengthen management over existing SK subsidiaries (including SK Telecom)
• Build a growth-oriented portfolio via larger investments in high-growth areas and businesses with
promising futures (platform, etc.)
• Encourage innovation in existing businesses and increase efficiency in businesses with deteriorating
profits (wired network, etc.)
SK Telecom businesses to
undergo restructuring in line
with SK Group’s growth
strategy
Source: SK, KDB Daewoo Securities Research
Governance and growth
strategies
Building growth-oriented portfolio and innovating existing businesses
Increasing investments in growth areas
Rebuilding portfolio to shift focus to high-
growth areas and promising businesses
Strengthen portfolio value management
Portfolio restructuring and proactive efforts
toward management improvement
TIP
Slow growth
and falling
profitability

Telecom
Service
2H15 Outlook 49
SK Group to strengthen integrated ICT solutions business
• SK Group to strengthen growth in integrated ICT solutions (SK Telecom’s subsidiary NEOS
Networks)
• SK Telecom increased investments in NSOK via rights offering on April 29th
(roughly W40bn)
• NSOK posted revenue of W33.3bn last year (high growth of +18% YoY)
Integrated ICT solutions: IT
services, integrated security,
smart logistics, etc.
Governance and growth
strategies
TIP
Information security Physical security
Convergence
security solutions
Control center
Emergency
security
services
Temperature
sensor
NW
security
System
security
Application
service

Telecom
Service
2H15 Outlook 50
Corporate governance
10.0%
100%
100%
100%
100%
100%
100%
100%
100%
67.3%
100%
Television
Media Korea
SK C&C
(034730 KS)
M & Service
SK E&S
Infosec
43.5%
100%
SK Telink
SK Wyverns
SK Trading
International
SK Lubricants
Daehan
Oil Pipeline
33.4%
UB Care
(032620 KQ)
SK Hynix
(000660 KS)
SK E&C
SK Telecom
(017670 KS)
Daejeon
Clean Water
Gwangju
Clean Water
SK Gas
(018670 KS)
Happy Narae
SK-W
SK Telesys
SKC Solmics
(057500 KQ)
SKC
(011790 KS)
SKC Lighting
PS & Marketing
F&U
Credit Information
Iriver
SK Broadband
(033630 KQ)
SKC Airgas
SK Pinx
SK Networks
Service
SK Networks
(001740 KS)
Busan City Gas
(015350 KS)
Wirye
Energy Service
Chonnam
City Gas
Kangwon
City Gas
Chungcheong
Energy Service
Yeongnam
Energy Service
Jeonbuk
Energy Service
Pyeongtaek
Energy Service
SK ShippingSK Biopharm
SK Chemical
(006120 KS)
SK Energy
SK Global Chemical
SK Innovation
(096770 KS)
94.1%
83.1%
44.5%25.2% 42.3%
0.06%
SK Securities
(001510 KS)
SK Encarsales.com
5.9%
50.0%
100%
31.8%
17.0%
45.5%
44.0%
100%
5.0%
28.3%
32.0%
42.0%
10.0%100%
100%
41.0%
86.5%
39.1%
100%
80.0%
40.9%
50.0%
90.0%
20.1%
83.5%
100%
50.6%
100%
50.0%
51.0%
100%
100%
100%
100%
Service Top
100%
100%
Ko-one
Energy Service
89.5%
SK Communications
(066270 KQ)
Choi Chang-won &
affiliates
Commerce Planet
100%
64.5%
SK E&S
49.0%
Service Ace
SK Planet
Network ONS
100%
100%
Bizen
99.0%
PMP
Boryeong LNG
Terminal
80.0%
SK Forest
100%
SK Hyeng
SK Hystec
Silicon File Tech.
100%
100%
Choi Tae-won &
affiliates
SK Mobile
Energy
Happy Narae
100%
SK Incheon
Petrochemical
100%
42.5%
Ulsan Aromatics
50.0%
Speed Motors
Entis
Initz
66.0%
50.0%
SK Advanced
65.0%
Hanam
Energy Service
100
%
Kimcheon
Energy Service
50.0%
100%
SK Continental
Emotion Korea
100%
42.5%
NEOS Networks
66.7%
100%
Jeonbuk
Mass Energy
SK D&D
G Hub
SK Petrochemical
100%
43.5%
100%
SK
(003600 KS)
SK Syntec
Notes: As of end-1Q15; SK C&C-SK Holdings merger to be completed Aug. 1st
2015; As SK
Telecom participated in the rights offering of NEOS Networks, its ownership increased to 83.93%
on Apr. 29th
, 2015; As SK Telecom’s ownership in SK Broadband increased to 100% through a
share exchange on June 9th
, 2015, SK Broadband has been de-listed; SK Planet plans to spin off
cloud streaming business on July 1st
, 2015.

Telecom
Service
2H15 Outlook 51
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)
(Wbn) 12/14 12/15F 12/16F 12/17F (Wbn) 12/14 12/15F 12/16F 12/17F 12/14 12/15F 12/16F 12/17F
Revenue 17,164 17,752 18,361 18,934 Current Assets 5,083 6,232 6,694 8,189 P/E (x) 12.0 10.3 9.4 9.2
Cost of Sales 0 0 0 0 Cash and Cash Equivalents 834 1,609 1,927 3,227 P/CF (x) 4.5 4.1 3.9 3.8
Gross Profit 17,164 17,752 18,361 18,934 AR & Other Receivables 3,083 3,354 3,438 3,545 P/B (x) 1.3 1.1 1.0 1.0
SG&A Expenses 15,339 15,785 16,173 16,692 Inventories 268 291 301 311 EV/EBITDA (x) 5.9 5.2 4.7 4.3
Operating Profit (Adj) 1,825 1,967 2,188 2,242 Other Current Assets 898 978 1,028 1,106 EPS (W) 22,307 24,427 26,739 27,263
Operating Profit 1,825 1,967 2,188 2,242 Non-Current Assets 22,858 23,517 23,940 24,143 CFPS (W) 59,177 60,816 64,380 65,767
Non-Operating Profit 429 537 553 553 Investments in Associates 6,298 6,550 6,775 6,986 BPS (W) 206,159 222,328 240,282 258,760
Net Financial Income -264 -250 -214 -169 Property, Plant and Equipment 10,568 10,730 10,737 10,541 DPS (W) 9,400 10,000 10,000 10,000
Net Gain from Inv in Associates 906 830 850 850 Intangible Assets 4,402 4,552 4,702 4,852 Payout ratio (%) 37.1 35.8 32.7 32.1
Pretax Profit 2,254 2,504 2,741 2,795 Total Assets 27,941 29,749 30,634 32,332 Dividend Yield (%) 3.5 4.0 4.0 4.0
Income Tax 455 523 573 584 Current Liabilities 5,420 5,796 5,172 5,322 Revenue Growth (%) 3.4 3.4 3.4 3.1
Profit from Continuing Operations 1,799 1,981 2,168 2,211 AP & Other Payables 1,657 1,803 1,865 1,923 EBITDA Growth (%) -2.6 5.0 6.6 3.0
Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 1,151 1,151 367 367 Operating Profit Growth (%) -9.2 7.8 11.2 2.5
Net Profit 1,799 1,981 2,168 2,211 Other Current Liabilities 2,612 2,842 2,940 3,032 EPS Growth (%) 9.9 9.5 9.5 2.0
Controlling Interests 1,801 1,972 2,159 2,201 Non-Current Liabilities 7,273 7,391 7,441 7,488 Accounts Receivable Turnover (x) 7.4 7.1 6.9 6.9
Non-Controlling Interests -2 8 9 9 Long-Term Financial Liabilities 5,930 5,930 5,930 5,930 Inventory Turnover (x) 77.2 63.5 62.0 61.9
Total Comprehensive Profit 1,771 1,981 2,168 2,211 Other Non-Current Liabilities 1,343 1,461 1,511 1,558 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0
Controlling Interests 1,778 1,977 2,165 2,207 Total Liabilities 12,693 13,187 12,613 12,810 ROA (%) 6.6 6.9 7.2 7.0
Non-Controlling Interests -7 3 3 4 Controlling Interests 14,506 15,812 17,262 18,754 ROE (%) 12.9 13.0 13.1 12.2
EBITDA 4,717 4,955 5,281 5,438 Capital Stock 45 45 45 45 ROIC (%) 10.2 10.4 11.5 11.7
FCF (Free Cash Flow) 669 1,195 1,430 1,608 Capital Surplus 2,916 2,916 2,916 2,916 Liability to Equity Ratio (%) 83.2 79.6 70.0 65.6
EBITDA Margin (%) 27.5 27.9 28.8 28.7 Retained Earnings 14,189 15,494 16,944 18,436 Current Ratio (%) 93.8 107.5 129.4 153.9
Operating Profit Margin (%) 10.6 11.1 11.9 11.8 Non-Controlling Interests 742 750 759 768 Net Debt to Equity Ratio (%) 36.6 28.6 20.1 11.8
Net Profit Margin (%) 10.5 11.1 11.8 11.6 Stockholders' Equity 15,248 16,562 18,021 19,522 Interest Coverage Ratio (x) 5.6 6.3 7.4 8.0
Source: SK Telecom, KDB Daewoo Securities Research estimates

Telecom
Service
2H15 Outlook 52
KT (030200 KS)
Stocks
to watch
Focus on normalization of earnings, dividends, and share price
Investment points
• Earnings normalizing: Quarterly operating profit recovered to the W300bn level this year thanks
to a cost decline (following last year’s restructuring)
• Operation normalizing: Swung to a net subscriber addition in 2Q15; At the forefront of releasing
data-oriented plans
• Likely to resume dividend payout this year after suspending its dividend last year; Long-term
dividend investors likely to return
• Valuation merits: P/B of just 0.6x; Valuation should look increasingly attractive alongside
improvement in fundamentals
Risks
• Fixed-line revenue is on the decline
• With subscribers increasingly moving to MVNOs, rise in ARPU might be slow
closing price
FY (Dec.) 12/12 12/13 12/14F 12/15F 12/16F 12/17F
Revenue (Wbn) 23,856 23,811 23,422 22,021 22,015 22,152
OP (Wbn) 1,209 839 -292 1,158 1,192 1,221
OP margin (%) 5.1 3.5 -1.2 5.3 5.4 5.5
NP (Wbn) 1,046 -162 -1,055 1,127 647 695
EPS (W) 4,006 -622 -4,040 4,318 2,479 2,663
ROE (%) 8.7 -1.4 -9.5 10.3 5.5 5.7
P/E (x) 8.9 - - 6.8 11.9 11.1
P/B (x) 0.7 0.6 0.7 0.6 0.6 0.6
(Maintain) Buy
Share Price (6/9/15, W) 29,500
Expected Return 36%
OP (15F, Wbn) 1,158
Consensus OP (15F, Wbn) 1,120
EPS Growth (15F, %) -
P/E (15F, x) 6.8
KOSPI 2,064.03
Free Float (%) 84.9
Beta (12M) 0.72
52-Week Low 28,500
52-Week High 36,800
(%) 1M 6M 12M
Absolute -4.1 -7.7 -1.8
Relative -3.1 -11.8 -5.3
80
90
100
110
120
130
14.6 14.10 15.2 15.6
KT KOSPI

Telecom
Service
2H15 Outlook 53
KT (030200 KS)
Turnaround in progress
Stocks
to watch
• KT to normalize in 2015
• Earnings and FCF are likely to turn positive thanks to a low base effect resulting from restructuring-
related one-off expenses
• Likely to resume dividend payout after suspending its dividend last year; Sale of subsidiaries to
boost cash flow and earnings recovery
Likely to resume dividend payoutOperating profit and FCF to turn positive this year
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
11 12 13 14 15F 16F
(Wbn)
Consolidated operating profit
Consolidated FCF
Swung to positive
0
500
1,000
1,500
2,000
2,500
11 12 13 14 15F 16F
(W)
DPS
Resumption
of dividend payments

Telecom
Service
2H15 Outlook 54
KT (030200 KS)
Stocks
to watch
Governance
Notes: As of end-1Q15; KT Media Hub merged with KT on Mar.
31st
; Sale of KT Rental was completed on June 3rd
; KT’s stake in
KT Innoedu changed to 79.54% on June 4th
; Sale of KT Capital
was delayed
100%
100%
57.0%
100%
KT Skylife
(053210 KS)
WIC
Sofnics
KT Estate
KT Rental
H&C Network
69.5%
99.0%
1.0%
VP
50.9%
Initech
Smartro HoldingsSmartro
100%
61.2%
Initech
(053350 KQ)
Skylife TV
50.0%
52.3%
77.7%
0.1%
Animax
Broadcasting Korea
48.0%
100%
19.9%
KTH
(036030 KQ)
KT Commerce
63.7%
KT Capital
KTcs
(058850 KS)
50.0%
36.9%
45.4%
93.8%
100%
51.0%
65.0%
82.8%
51.0%
83.6%
7.4%
100%
35.5%
100%
100%
86.8%
95.3%
100%
51.0% KT Sports
Best Partners
48.4%
14.8%
26.2%
77.4%
100%
58.0%
60.0%
100% KT Rental
Autocare
KT Autolease
Green Car
KT
(030200 KS)
KT AMC
KD Living
51.0%
18.0%6.0%
4.0%
6.0%
BC Card
29.3%
KT
WiBro Infra
26.2%
KT Powertel
44.8%
19.0%
16.4%
81.0%
11.6%
11.3%
KT Sports
6.0%
3.4%
KT NexR
100%
KT Media Hub
Nasmedia
(089600 KQ)
CentiosKT Sat
T-on Telecom KT Mhows
Smart Channel KT Innoedu
U-stream Korea KT Autopion
KTDS KT-SB
Data Service
KT Linkus KT Telecop
KT Submarine
(060370 KQ)
KT M&S
KT Music
(043610 KQ)
KT ENS
KTIS
(058860 KS)
EnswersSold
Sold
Liquidated
Liquidated
Merged

Telecom
Service
2H15 Outlook 55
KT (030200 KS)
Stocks
to watch
Revenue 23,422 22,021 22,015 22,152 Current Assets 8,751 10,894 10,618 12,168 P/E (x) - 6.8 11.9 11.1
Cost of Sales 0 0 0 0 Cash and Cash Equivalents 1,889 4,131 3,555 4,605 P/CF (x) 1.9 1.5 1.6 1.5
Operating Profit (Adj) -292 1,158 1,192 1,221 Other Current Assets 3,346 3,297 3,599 4,076 EPS (W) -4,040 4,318 2,479 2,663
Operating Profit -292 1,158 1,192 1,221 Non-Current Assets 25,025 24,027 23,251 22,266 CFPS (W) 16,859 19,654 19,030 19,160
Non-Operating Profit -945 279 -280 -252 Investments in Associates 339 334 334 336 BPS (W) 42,921 47,239 48,968 50,694
Net Financial Income -420 -431 -381 -343 Property, Plant and Equipment 16,468 15,885 15,433 14,704 DPS (W) 0 800 1,000 1,000
Net Gain from Inv in Associates 18 613 0 0 Intangible Assets 3,544 3,144 2,821 2,558 Payout ratio (%) 0.0 17.6 34.4 32.4
Pretax Profit -1,237 1,437 912 969 Total Assets 33,776 34,921 33,869 34,434 Dividend Yield (%) 0.0 2.7 3.4 3.4
Income Tax -271 320 201 213 Current Liabilities 9,992 9,601 8,034 8,077 Revenue Growth (%) -1.6 -6.0 0.0 0.6
Profit from Continuing Operations -966 1,117 711 756 AP & Other Payables 1,200 1,183 1,182 1,190 EBITDA Growth (%) -20.1 41.5 -3.4 0.9
Profit from Discontinued Operations 0 -3 0 0 Short-Term Financial Liabilities 3,000 2,709 1,144 1,144 Operating Profit Growth (%) - - 2.9 2.4
Net Profit -966 1,114 711 756 Other Current Liabilities 5,792 5,709 5,708 5,743 EPS Growth (%) - - -42.6 7.4
Controlling Interests -1,055 1,127 647 695 Non-Current Liabilities 11,993 12,415 12,415 12,427 Accounts Receivable Turnover (x) 7.4 7.1 7.2 7.2
Non-Controlling Interests 89 -13 64 60 Long-Term Financial Liabilities 10,085 10,535 10,535 10,535 Inventory Turnover (x) 46.5 56.4 56.8 57.0
Total Comprehensive Profit -1,201 1,114 711 756 Other Non-Current Liabilities 1,908 1,880 1,880 1,892 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0
Controlling Interests -1,277 1,111 708 753 Total Liabilities 21,985 22,016 20,448 20,503 ROA (%) -2.8 3.2 2.1 2.2
Non-Controlling Interests 76 3 3 3 Controlling Interests 10,341 11,469 11,920 12,370 ROE (%) -9.5 10.3 5.5 5.7
EBITDA 3,563 5,041 4,868 4,912 Capital Stock 1,564 1,564 1,564 1,564 ROIC (%) -1.1 4.3 4.6 4.9
FCF (Free Cash Flow) -936 1,646 1,414 1,532 Capital Surplus 1,440 1,440 1,440 1,440 Liability to Equity Ratio (%) 186.5 170.6 152.4 147.2
EBITDA Margin (%) 15.2 22.9 22.1 22.2 Retained Earnings 8,571 9,699 10,150 10,601 Current Ratio (%) 87.6 113.5 132.2 150.7
Operating Profit Margin (%) -1.2 5.3 5.4 5.5 Non-Controlling Interests 1,449 1,436 1,500 1,561 Net Debt to Equity Ratio (%) 89.9 66.1 56.0 46.2
Net Profit Margin (%) -4.5 5.1 2.9 3.1 Stockholders' Equity 11,790 12,905 13,420 13,931 Interest Coverage Ratio (x) -0.6 2.2 2.4 2.6
Source: KT, KDB Daewoo Securities Research estimates

Telecom
Service
2H15 Outlook 56
LG Uplus (032640 KS)
Investment points
• Continued net subscriber growth: Net subscriber growth has continued in the MNP market, proving the
company has solid business capabilities that are immune to the changing market environment
• Fundamental changes in the subscriber base: Focus has been on high-ARPU subscribers since the
introduction of LTE services; Percentage of MVNO subscribers is the lowest
• Consistent dividend policy: Payout ratio of 30%; Improving free cash flow to provide more room for
dividend payout this year
• Benefits from the proliferation of simplified payment: The company is beefing up its own simplified
payment service, Paynow, backed by its dominance in the domestic payment gateway market
Risks
• Growth could slow, as the proportion of LTE subscribers in the total subscriber base is higher than the
market average
• The company, which ranks third in market share, is the most sensitive to the entry of a fourth player
closing price
FY (Dec.) 12/12 12/13 12/14F 12/15F 12/16F 12/17F
Revenue (Wbn) 10,905 11,450 11,000 10,545 10,700 10,764
OP (Wbn) 127 542 576 692 709 715
OP margin (%) 1.2 4.7 5.2 6.6 6.6 6.6
NP (Wbn) -60 279 228 368 394 410
EPS (W) -122 640 523 844 903 940
ROE (%) -1.6 7.2 5.6 8.5 8.5 8.4
P/E (x) - 16.8 22.0 11.2 10.5 10.1
P/B (x) 0.9 1.2 1.2 0.9 0.9 0.8
(Maintain) Buy
Share Price (6/9/15, W) 9,470
Expected Return 48%
OP (15F, Wbn) 692
Consensus OP (15F, Wbn) 674
EPS Growth (15F, %) 61.4
P/E (15F, x) 11.2
KOSPI 2,064.03
Free Float (%) 63.9
Beta (12M) 0.68
52-Week Low 8,890
52-Week High 12,850
(%) 1M 6M 12M
Absolute -3.4 -14.3 1.1
Relative -2.4 -18.2 -2.6
Solid business capabilities
80
100
120
140
160
14.6 14.10 15.2 15.6
LG Uplus KOSPI
Stocks
to watch

Telecom
Service
2H15 Outlook 57
Stocks
to watch
• Virtuous cycle of steady earnings improvement backed by solid business capabilities, leading to
improved dividend payment
• Steady net subscriber growth in the MNP market, despite implementation of the handset
distribution act, iPhone launches, data-oriented rate plans, etc.
• Dividend payout ratio to reach 30%; Divided per share to rise; Dividend yield also likely to rise with
recent share price correction
Source: KTOA, KDB Daewoo Securities Research
LG Uplus’ dividend yield to riseLG Uplus achieving steady net subscriber growth in the MNP market
Note: 2015F and 2016F dividend yields are based on Daewoo Securities’ estimates
Source: LG Uplus, KDB Daewoo Securities Research
Rising earnings and
dividend payout
demonstrate improved
fundamentals
2.6%
2.9%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
11 12 13 14 15F 16F
(%)
Dividend yield
-50,000
-40,000
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
6/14 8/14 10/14 12/14 2/15 4/15
(persons)
SKT KT LG Uplus

Telecom
Service
2H15 Outlook 58
Stocks
to watch
Corporate governance
Source: LG, KDB Daewoo Securities Research
100%
100%
64.8%
100%
51.0%
50.0%
100%
100%
61.3%
93.1%
LG Life Science
(068870 KS)
LG Solar Energy
Media Log
Dacom Crossing
CS Leader
A-in Teleservice
LG CNS
Ucess Partners
Serveone
LG Sports
33.5%
50.0%
34.0%
30.4%
37.9%
48.6%
33.7%
85.0%
100%
100%
Ji Heung
100% 27.9%
Koo Bon-moo
& affiliates
LG
(003550 KS)
LG UPlus
(032640 KS)
100%
36.0%
Korea Elecom
BNE
The Face Shop
Lusem
LG Siltron
HS Ad
L Best
100%
Global Dynasty
Natural Resource PEF
Sal de Vida Korea
33.3%
7.5%
50.0%
35.0%
Fuser
100%
33.5%
TOSTEM BM
50.0%
Hausys ENG100%
100%
98.4%
51.0%
LG Hausys
(108670 KS)
LG H&H
(051900 KS)
100%
Haitai Beverage
Hiplaza
HiBusiness Logistics
40.8%
100%
100%
LG Innotek
(011070 KS)
Himsolutek
100%
HiTeleservice
100%
Hausys Interpane
80.0%
LG MMA
LG Pure Cell Systems
LG MDI
Coca-Cola Korea
CleanSoul
100%
90.0%
100%
Ace R&A
Hientech
100%
100%
LG N-Sys
100%
LG-Toyo Engineering
Konjiam Yewon
90.0%
70.0%
LG International
(001120 KS)
Hankook Beverage
LG Chem
(051910 KS)
G2R
(035000 KS)
Nanumnuri
100%
Innowid100%
LG-Hitachi
Water Solutions
51.0%
75.0%
100%
Silicon Works
(108320 KQ)
28.2%
Hanuri
100%
Haengboknuri
100%
CS ONE Partner
WithU
100%
EverON
See Tec
Oneseen Skytech
90.8%
LG Electronics
(066570 KS)
LG Display
(034220 KS)

Telecom
Service
2H15 Outlook 59
Stocks
to watch LG Uplus (032640 KS)
Revenue 11,000 10,545 10,700 10,764 Current Assets 2,490 2,626 3,023 3,476 P/E (x) 22.0 11.2 10.5 10.1
Cost of Sales 0 0 0 0 Cash and Cash Equivalents 416 475 813 1,215 P/CF (x) 2.2 1.8 1.8 1.9
Operating Profit (Adj) 576 692 709 715 Other Current Assets 165 202 235 274 EPS (W) 523 844 903 940
Operating Profit 576 692 709 715 Non-Current Assets 9,523 9,711 9,639 9,496 CFPS (W) 5,163 5,158 5,175 5,086
Non-Operating Profit -256 -201 -184 -168 Investments in Associates 9 0 0 0 BPS (W) 9,567 10,261 10,914 11,583
Net Financial Income -171 -176 -162 -130 Property, Plant and Equipment 7,254 7,533 7,516 7,419 DPS (W) 150 250 270 280
Net Gain from Inv in Associates 1 0 0 0 Intangible Assets 1,116 1,033 978 930 Payout ratio (%) 28.8 29.7 29.9 29.8
Pretax Profit 320 491 525 547 Total Assets 12,013 12,337 12,663 12,972 Dividend Yield (%) 1.3 2.6 2.9 3.0
Income Tax 92 123 131 137 Current Liabilities 3,486 2,896 2,929 2,942 Revenue Growth (%) -3.9 -4.1 1.5 0.6
Profit from Continuing Operations 228 368 394 410 AP & Other Payables 1,427 1,456 1,477 1,486 EBITDA Growth (%) 12.1 9.4 0.2 -1.0
Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 1,129 649 649 649 Operating Profit Growth (%) 6.3 20.1 2.5 0.8
Net Profit 228 368 394 410 Other Current Liabilities 930 791 803 807 EPS Growth (%) -18.3 61.4 7.0 4.1
Controlling Interests 228 368 394 410 Non-Current Liabilities 4,349 4,961 4,969 4,973 Accounts Receivable Turnover (x) 7.3 7.2 7.2 7.2
Non-Controlling Interests 0 0 0 -1 Long-Term Financial Liabilities 3,787 4,387 4,387 4,387 Inventory Turnover (x) 32.8 37.8 37.7 37.5
Total Comprehensive Profit 221 368 394 410 Other Non-Current Liabilities 562 574 582 586 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0
Controlling Interests 221 368 394 410 Total Liabilities 7,835 7,856 7,898 7,915 ROA (%) 1.9 3.0 3.1 3.2
Non-Controlling Interests 0 -1 -1 -1 Controlling Interests 4,177 4,480 4,765 5,058 ROE (%) 5.6 8.5 8.5 8.4
EBITDA 2,082 2,277 2,282 2,259 Capital Stock 2,574 2,574 2,574 2,574 ROIC (%) 4.9 5.8 5.9 6.0
FCF (Free Cash Flow) -129 78 549 621 Capital Surplus 837 837 837 837 Liability to Equity Ratio (%) 187.5 175.4 165.8 156.5
EBITDA Margin (%) 18.9 21.6 21.3 21.0 Retained Earnings 764 1,067 1,352 1,645 Current Ratio (%) 71.4 90.7 103.2 118.1
Operating Profit Margin (%) 5.2 6.6 6.6 6.6 Non-Controlling Interests 1 0 0 -1 Net Debt to Equity Ratio (%) 106.7 100.8 87.7 74.7
Net Profit Margin (%) 2.1 3.5 3.7 3.8 Stockholders' Equity 4,178 4,480 4,765 5,057 Interest Coverage Ratio (x) 2.7 3.2 3.2 3.2
Source: LG Uplus, KDB Daewoo Securities Research estimates

Telecom
Service
2H15 Outlook 60
Telecom service sector: Take note of telcos likely to deliver differentiated performance
[Conclusion] Look to earnings improvements and dividend payout
Stocks to watch
1) Resumption of dividend payout: KT
2) Net subscriber growth: LG Uplus
Top pick
Likely to recover on high
dividend yield and new
business value in the event
regulatory risks ease
SK Telecom

Important Disclosures & Disclaimers
2-Year Rating and Target Price History
Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price
SK Telecom(017670) 05/06/2015 Buy 360,000 07/19/2013 Buy 45,000
10/01/2014 Buy 380,000 06/11/2013 Buy 50,000
08/03/2014 Buy 310,000 No Coverage
10/29/2013 Buy 290,000 LG Uplus(032640) 04/28/2015 Buy 14,000
07/19/2013 Buy 280,000 01/25/2015 Buy 16,000
06/11/2013 Buy 270,000 10/01/2014 Buy 15,000
No Coverage 07/31/2014 Buy 11,500
KT(030200) 01/20/2015 Buy 40,000 04/28/2014 Buy 13,000
10/01/2014 Buy 42,000 01/20/2014 Buy 15,000
05/01/2014 Buy 40,000 07/19/2013 Buy 16,000
01/20/2014 Trading Buy 36,000 06/11/2013 Buy 15,000
11/03/2013 Trading Buy 38,000 No Coverage
08/04/2013 Buy 44,000
Stock Ratings Industry Ratings
Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes
Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening
Sell : Relative performance of -10%
Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings.
* The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.
0
100,000
200,000
300,000
400,000
Jun 13 Jun 14 Jun 15
(W) SK Telecom
0
10,000
20,000
30,000
40,000
50,000
60,000
(W) KT
0
5,000
10,000
15,000
20,000
(W) LG Uplus

Analyst Certification
The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither
registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately
reflect the personal views of the Analysts primarily responsible for this report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any
company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the
Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part
of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Daewoo Securities, the
Analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary
trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Daewoo
Securities Co., Ltd. except as otherwise stated herein.
Disclaimers
This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained
herein have been compiled from sources believed to be reliable and in good faith, but such information has not been independently verified and Daewoo makes no guarantee, representation or
warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language.
If this report is an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. Daewoo,
its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This report is for general information purposes only and it is not and
should not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The intended recipients of this report are sophisticated
institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report
would violate any laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof. Information and
opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part,
without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time
and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as
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and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur.
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under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a major institutional investor and have
Equity Ratings Distribution
Buy Trading Buy Hold Sell
71.9% 13.8% 14.3% 0%
* Based on recommendations in the last 12-months (as of March 31, 2015)
Disclosures
As of the publication date, Daewoo Securities Co., Ltd. has acted as a liquidity provider for single stock futures backed by shares of KT as an underlying asset, and other than this, Daewoo Securities
has no other special interests in the covered companies.

not received this report under any express or implied understanding that they will direct commission income to Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a
transaction in any securities discussed herein should contact and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The
securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent
registration or an applicable exemption from the registration requirements.
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All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or its affiliates only if distribution to or use
by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction.
KDB Daewoo Securities International Network
Daewoo Securities Co. Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc.
Head Office
34-3 Yeouido-dong, Yeongdeungpo-gu
Seoul 150-716
Korea
Two International Finance Centre
Suites 2005-2012
8 Finance Street, Central
Hong Kong, China
320 Park Avenue
31st Floor
New York, NY 10022
United States
Tel: 82-2-768-3026 Tel: 85-2-2845-6332 Tel: 1-212-407-1000
Daewoo Securities (Europe) Ltd. Daewoo Securities (Singapore) Pte. Ltd. Tokyo Branch
41st Floor, Tower 42
25 Old Broad St.
London EC2N 1HQ
United Kingdom
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Tokyo 100-0005
Japan
Tel: 44-20-7982-8000 Tel: 65-6671-9845 Tel: 81-3- 3211-5511
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2401A, 24th Floor, East Tower, Twin Towers
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China
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China
Suite 2103, Saigon Trade Center
37 Ton Duc Thang St,
Dist. 1, Ho Chi Minh City,
Vietnam
Tel: 86-10-6567-9299 Tel: 86-21-5013-6392 Tel: 84-8-3910-6000
Daewoo Investment Advisory (Beijing) Co., Ltd. Daewoo Securities (Mongolia) LLC PT. Daewoo Securities Indonesia
2401B, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
China
#406, Blue Sky Tower, Peace Avenue 17
1 Khoroo, Sukhbaatar District
Ulaanbaatar 14240
Mongolia
Equity Tower Building Lt.50
Sudirman Central Business District Jl.
Jendral Sudirman Kav. 52-53, Jakarta Selatan
Indonesia 12190
Tel: 86-10-6567-9699 Tel: 976-7011-0807 Tel: 62-21-515-1140

2015 2H Outlook: Korean Telecom service industry

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