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Research is provided by our team of experienced analysts. Our work is idea driven, based on independence of thought, sector expertise, and firmly focused on fundamentals and valuation of telecoms and internet names globally. New Street is headquartered in London with offices in New York, Singapore and Australia. 

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Equity Bottom-Up

The Korean wireless market remains a tough place to do business. The sector has a history of government interference coupled with bouts of almost suicidal competition. The government has managed to get probably the best cellular network in place on the planet but shareholders have been hard done by, not an unusual outcome in Korea to be fair.The latest quarterly results (4Q15) show slightly negative revenue growth and weaker margins but there was some good news on FCF and industry profitability. We are concerned about rising costs in the industry, but the low valuations mean share prices discount a lot of this already. Looking ahead there is potential for marketing costs to fall and for FCF to rise further while capex is low (only until 5G capex commences).Talk of a 4th operator has ended. None of the bidders were deemed suitable and not surprisingly no serious bids emerged given the low returns and a powerful active regulator. On that front there has been news recently that SKT's acquisition of CJ Hellovision (discussed in <a href="https://www.smartkarma.com/insights/skt-s-move-to-acquire-cj-hellovision-removes-a-potential-competitor-and-delivers-fixed-line-scale" target="_blank" data-smartkarma-citation="insights:1756">SKT's move to acquire CJ Hellovision removes a potential competitor and delivers fixed line scale</a> ) may be delayed by the regulator. Disappointing but hard to see the basis for a rejection unless there is a real shift in regulatory approach.

The Korean wireless market remains a tough place to do business. The sector has a history of government interference coupled with bouts of almost suicidal competition. The government has managed to get probably the best cellular network in place on the planet but shareholders have been hard done by, not an unusual outcome in Korea to be fair.The latest quarterly results (4Q15) show slightly negative revenue growth and weaker margins but there was some good news on FCF and industry profitability. We are concerned about rising costs in the industry, but the low valuations mean share prices discount a lot of this already. Looking ahead there is potential for marketing costs to fall and for FCF to rise further while capex is low (only until 5G capex commences).Talk of a 4th operator has ended. None of the bidders were deemed suitable and not surprisingly no serious bids emerged given the low returns and a powerful active regulator. On that front there has been news recently that SKT's acquisition of CJ Hellovision (discussed in SKT's move to acquire CJ Hellovision removes a potential competitor and delivers fixed line scale ) may be delayed by the regulator. Disappointing but hard to see the basis for a rejection unless there is a real shift in regulatory approach.

SK Telecom

Korean Wireless: More Pain, No Gain