SKT's operating profit plummets 37% on year in Q2 after data breach

SK Telecom’s operating profit dropped 37 percent in the second quarter from a year earlier, reflecting the full impact of a cyberattack in April that targeted SIM systems and caused the leak of 26.96 million pieces of user data.

The SK Telecom logo is seen on a dealership in Jongno District, central Seoul, on July 3. [NEWS1]

SK Telecom’s operating profit dropped 37 percent in the second quarter from a year earlier, reflecting the full impact of a cyberattack in April that targeted subscriber identity module (SIM) systems and caused the leak of 26.96 million pieces of user data.

The company reported Wednesday that its consolidated revenue for the April-June period fell 1.9 percent on year to 4.34 trillion won ($3.12 billion). Operating profit dropped 37.1 percent to 338.3 billion won, while net profit tumbled 76.2 percent to 83.2 billion won.

The mobile carrier attributed the sharp decline to the aftermath of the hacking incident, which compromised subscriber security.

“Operating profit decreased due to one-off costs such as USIM replacements for customers and compensation for dealership losses,” the company said.

The breach led to a net loss of 720,000 subscribers via mobile number portability — which allows users to change mobile network operators while retaining their telephone numbers — between April 19 and July 14, according to SK Telecom.

“We are reviewing the cybersecurity incident with a clear-eyed perspective and will implement comprehensive improvements,” said Chief Financial Officer Kim Yang-seob.

Despite the blow from the security breach, SK Telecom’s AI business delivered solid results.

Revenue from AI-related operations grew 13.9 percent on year. AI data center revenue rose 13.3 percent to 108.7 billion won, while revenue from the AIX business — which develops and sells enterprise AI services — jumped 15.3 percent to 46.8 billion won, driven by business-to-business solution sales.

A customer enters a SK Telecom dealership in Seoul on June 23. [YONHAP]

What about KT and LG U+?

The hacking fallout has prompted analysts to project potential upside for SK Telecom’s domestic rivals, who are set to report earnings later this month. KT and LG U+ are expected to have absorbed some of the churned SKT customers.

KT added a net 280,000 mobile subscribers in the second quarter compared to the previous quarter, while LG U+ added 240,000, according to the Korea Telecommunications Operators Association.

Consensus estimates suggest KT’s Q2 operating profit may reach 865.8 billion won, a 75.3 percent jump on year, while LG U+ is forecast to post 278.6 billion won in operating profit, up 9.7 percent. LG U+ will report earnings on Friday, and KT will follow on Monday.

Song Sang-hoon, deputy minister of the office of ICT policy at the Ministry of Science and ICT, briefs the press on Aug. 4 at the government complex in Jongno District, central Seoul, on the selection of teams for Korea’s AI foundation model project. [YONHAP]

What's next for SKT?

Earlier this month, SK Telecom was selected as one of five teams to join a government-led initiative to develop Korea’s own large language model, or “AI foundation model.”

The project, spearheaded by the Ministry of Science and ICT, will grant participants a combined 200 billion won in resources, including GPUs, data, and recruitment support.

SK Telecom also plans to build Korea’s largest AI-dedicated data center in Ulsan in collaboration with Amazon Web Services. The facility is scheduled to begin operations in 2027.

The company pledged further investment in cybersecurity, stating: “We aim to build a world-class information security system and will invest 700 billion won in the next five years.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY PARK JONG-SUH [kim.juyeon2@joongang.co.kr]