After the hacking incident, SK Telecom has completed the SIM card replacement for all reservations. Consumers expect that when new enrollment sales resume, SK Telecom will significantly increase mobile phone subsidies to regain lost subscribers, but there are also predictions within and outside the telecommunications industry that there will be no competition for subsidies. This is due to the increased burden of compensating for losses incurred by subscribers and distribution networks as a result of the hacking incident, and the lack of resources to engage in aggressive subsidy marketing while adhering to commitments to increase dividends for shareholder returns.
According to SK Telecom, as of the 23rd, the SIM card replacement has been completed for all subscribers who applied for a replacement on the 19th (approximately 10 million, excluding customers who postponed after applying for a replacement). Consequently, the telecommunications industry anticipates that the government will lift SK Telecom's administrative guidance to suspend new enrollment sales within this month. According to the Korea Telecommunications Operators Association (KTOA), approximately 670,000 subscribers switched from SK Telecom to KT, LG Uplus, and budget phones (MVNO) in April and May of this year.
Consumers and the mobile telecommunications distribution industry predict that when SK Telecom resumes new enrollment sales, it will significantly increase mobile phone subsidies and launch aggressive marketing to recover lost subscribers. The fact that SK Telecom has the largest cash reserves among the three major telecommunications companies also heightens these expectations. As of the first quarter of this year, SK Telecom's cash and cash equivalents (hereafter referred to as cash assets) amounted to 1.3395 trillion won, a 14.5% increase compared to the fourth quarter of last year, making it the only company among the three to see an increase. During the same period, KT's cash assets were 1.1506 trillion won, about a 25% decrease from the previous fourth quarter, while LG Uplus saw a 16% decrease to 590 billion won. The industry anticipates that after the Disabling Law (the Act on Improving the Distribution Structure of Mobile Communication Devices) is abolished in July, SK Telecom will release significant mobile phone subsidies, sparking competition for subsidies.
However, due to SK Telecom's complex circumstances, there are also significant opinions that the competition for subsidies will not be triggered contrary to expectations. This is because thousands of billions of won will be required for compensating losses incurred by SK Telecom distribution points and for compensating all subscribers affected by personal information leakage. Additionally, investments in information security must also be increased to prevent the recurrence of hacking incidents.
Above all, SK Telecom's biggest concern is fulfilling its commitment to increase dividends. This year's performance is expected to be lower than last year due to the hacking incident, yet an increase in dividends seems unavoidable. In April of this year, SK Telecom promised to pay out more than 50% of its net income as dividends over the next three years as part of its shareholder return strategy.
Some view that the increase in SK Telecom's dividends is unavoidable to cover the alimony payment related to SK Group Chairman Chey Tae-won's divorce, which amounts to 1.38 trillion won. SK Co., Ltd. is the largest shareholder with approximately 30% stake in SK Telecom, while Chairman Chey owns 17.73% of SK Co., Ltd.
A securities industry official noted that "the holding company’s stock tends to rise as dividend revenue increases. If the dividends of SK Co., Ltd.'s subsidiaries are expanded, it will create momentum for SK Co., Ltd.'s stock price to rise," adding that "if Chairman Chey sells stocks to secure alimony, the higher the stock price, the fewer shares he will have to dispose of, making the expansion of SK Telecom's dividends an unavoidable aspect."
Professor Kim Kyung-won of Sejong University noted that "if SK Telecom significantly increases its dividends, it may benefit shareholders in the short term, but in the long term, it could be contrary to shareholder interests. Increasing marketing costs with cash resources to recover lost subscribers is what enhances corporate value." He added that "if dividends are expanded excessively, creating favorable results for the major shareholder (owner), this could give justification to the ruling party's push for amendments to the Commercial Act aimed at preventing the abuse of authority by the major shareholders."