SK Telecom - Earnings Call - Q4 2024
February 12, 2025
Transcript
Hee Jun Chung (IRO)
Good afternoon. I am Hee Jun Chung, IRO of SK Telecom. Let us begin the earnings conference call for the fourth quarter and the fiscal year 2024. Today, we will first deliver a presentation on the financial and business highlights, followed by a Q&A session. Please note that all forward-looking statements are subject to change depending on various factors such as market and management situations. Let me now present our CFO.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Good afternoon. This is Yang Seob Kim, CFO of SK Telecom. It is my first time to greet you in 2025. I'd like to wish you a Happy New Year and good health and happiness in the new year.
Yang Seob Kim (CFO)
[Forein langugae].
Hee Jun Chung (IRO)
For SK Telecom, 2024 was all about Operational Improvements and Artificial Intelligence. While Operational Improvement efforts further strengthened our competitiveness in the telecom business, the AI Pyramid Strategy guided us in refining business models and establishing execution systems to lay the foundation to become an AI company.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
We focused on Operational Improvements not just to reduce costs, but also to enhance our overall portfolio, processes, and culture to strengthen the company's business fundamentals. Thanks to these efforts, the consolidated operating profit grew 4% year-over-year, and the OP margin exceeded 10%.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Let me now report on the consolidated financial results for 2024.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Consolidated revenue reported KRW 17.9406 trillion, up 1.9% year-over-year.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
With sustained growth in all business areas, including fixed and mobile, enterprise, and AI, our consolidated revenue has continued the upward trend since the spin-off in 2021. MNO business saw a slight slowdown in its top-line growth, but customer-friendly roaming services contributed to MNO revenue growth, while significant growth in data center and B2B business such as cloud and AICC contributed to consolidated revenue growth.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Operating income posted KRW 1.8234 trillion.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Throughout the year, we successfully reduced major expenses such as marketing and D&A costs through cost-efficiency measures. To continue the trend, we are utilizing AI to further drive cost efficiency in key business areas and processes. Last year, we also rebalanced our business portfolio by phasing out low-profit businesses and increasing the share of high-profit ones, thereby laying the foundation for sustainable growth in the future, not just short-term operating income growth.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Net income posted KRW 1.4388 trillion, up 25.6% year-over-year, thanks to the business portfolio restructuring and asset efficiency enhancement as part of the Operational Improvements.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Next, let me report on AI-related highlights.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
In 2024, SK Telecom strengthened its global AI partnerships through equity investments in diverse AI-related domains. Specifically, we made strategic investments in Lambda and Penguin Solutions to utilize their expertise in AI data center business. Furthermore, we're closely collaborating with global AI tech companies such as Perplexity and Anthropic for A., Aster, and Telco LLM. Last month, we launched SKT GPU as a service that we had been preparing for a year with Lambda. This year, we will carry out AI business activities in earnest to achieve meaningful growth in AI-related revenue.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
In this regard, we have changed the classification of AI-related revenue. The entire business of SK Telecom is largely divided into two categories: telecom business and AI business, which includes AIX, AIDC, A., and GPAA. Previously, we showed figures on cloud and data center business, but starting from this year, we will announce quarterly sales of AIX and AIDC, which are AI-related B2B business, to provide you with a more comprehensive view of AI business growth. In 2024, AI-related revenue grew 19% year-over-year. Going forward, we will continue to accelerate AI business growth through the construction of AI Infrastructure Superhighway and monetization efforts.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Another pillar of our AI business is PAA, which is now organized into two tracks: A. for the domestic market and Aster for global customers. After an overhaul in August last year, A. was able to achieve a 160% growth year-over-year in total users thanks to the application of AI to phone calls and multi-LLM agent features. Having been unveiled in November last year, Aster presented a comprehensive daily management service model at CES 2025 and will launch a beta service in the first half of the year in the U.S..
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Finally, let me turn to shareholder return for 2024 and earnings guidance for 2025.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
The DPS for 2024 was determined by the board at KRW 3,541, including the quarterly dividend of KRW 2,491 that was already paid out. It is subject to the approval at the annual general meeting of shareholders in March.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Our annual consolidated revenue target for 2025 is KRW 17.8 trillion. It represents approximately 1% growth year-over-year on a normalized basis after removing the impact of sales of certain subsidiaries late last year. We also aim to achieve a YOY growth in operating income through continuous operational improvements.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
This year, we anticipate significant economic, industrial, and political changes both in Korea and globally. We will strengthen our fundamental competitiveness to cope with high uncertainty and pioneer the AI era through challenges and innovations, thereby further enhancing our corporate value.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
We look forward to your continued support and encouragement. Thank you.
Yang Seob Kim (CFO)
[Foreign language].
Operator (participant)
[Foreign language]. Now, Q&A session will begin. Please press star one, that is star and number one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and number two on your phone. [Foreign language]. The first question will be provided by Kim Hoi-Jae from Daishin Securities. Please go ahead with your question.
Hoi-Jae Kim (Analyst)
[Foreign language].
Hee Jun Chung (IRO)
I'm Kim Hoi-Jae from Daishin Securities. I would like to ask two questions. First of all, in your opening speech, you already talked about your plans for AI-related businesses, but I'd like to understand what would be the key focus areas for SK Telecom in conducting AI business, and if you can provide us with some guidance on AI-related revenue outlook, we will appreciate that. My second question is concerned with shareholder return. There were some concerns that SK Telecom's dividend per share might decline. However, you've decided to go ahead with a DPS of KRW 3,541, which is the same as the previous year. So I'd like to understand the background behind this decision and also if you can add some color on what we can expect for 2025 for shareholder return, including any plans on share buyback. I would appreciate that. Thank you.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
I'm CFO Kim Yang Seob. Thank you for your questions. I'd first like to talk about AI-related revenue.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
At the end of last year, SK Telecom restructured the company into seven business units based on two pillars of telecom and AI, and the AI business includes A. and GPAA for B2C business and AIX and AIDC for B2B business.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
You asked the question about AI-related revenue, and it is being materialized, first of all, in our B2B business, such as AIX and AIDC.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
The AIX business unit includes not only the AI cloud business, but also other diverse AI B2B products, such as AI Vision and AIDC. In this category, we posted KRW 193 billion of revenue last year, and it is expected to grow about 30% this year.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Now, revenue from AIDC in 2024 was KRW 397.4 billion, up 13% year-over-year. It is mostly revenue coming from our conventional data center business operation, but we recently launched GPU as a service in partnership with Lambda, and so we will pursue this business in earnest this year.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
We plan to conduct AIDC business more actively by establishing a cooperation system with global players as well as SK Group affiliates. We see a growing demand for AI data centers in the market, so we believe that the AIDC revenue can grow more significantly. We anticipate about a double-digit growth rate for AIDC business this year.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
This year, we will also develop more concrete business models for our AI B2C business. A. has established itself as a major personal AI agent service in Korea, and with a total of 8.27 million users, we're currently working on expanding services to offer more diverse features, and we plan to introduce a subscription-based paid service within this year.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
To sum it up, we will strive to grow our AI business revenue in a meaningful manner, and for this, we will strengthen our execution capabilities in all AI-related business areas to produce meaningful results. Thank you.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Let me now comment on our shareholder return policy.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Regarding our dividend, the board determined that the 2024 year-end DPS would be KRW 1,051, which is, as you know, the same as what we had in 2023, and the annual DPS is the same as the prior year, which is KRW 3,541.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
As CFO, I had to put a lot of thought before determining this year's dividend, and I understand that some shareholders expected an increase in dividend payout, but we decided to maintain the minimum dividend level expected by the market in consideration of the uncertain business environment.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Our earnings improved in 2024, but in the context of rapidly changing economic and political circumstances, both at home and abroad, we need to secure resources for investment to stay in the competition for AI, and funds secured through operational improvements and business performance will be used to make investments for growth in AIDC and other businesses. This year, we also need resources to acquire equity of SK Broadband.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Going forward in 2025, what I can say is that our shareholder return is still the highest level in the industry, and we anticipate a lot of challenges in terms of both politics and economy, so we will continue to pursue operational improvements, including the liquidation of non-core assets, and pursue better improvements, and this is what we're going to reflect in our shareholder return.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
To achieve these objectives, we will continue to make investments for growth in AI areas, and we will have to continue to make relevant investments. However, at the same time, we're committed to stable shareholder return.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
As for the methods of shareholder return, our priority is to maintain a stable trend of cash dividend payout, and treasury share purchase and cancellation can still be a meaningful option when the stock is undervalued. However, for share buyback, we believe it is effective to announce a medium-term plan rather than just carrying it out as a one-off event. We will consider share buyback by considering various factors such as the stock price trend and market views in a more comprehensive manner.
Operator (participant)
[Foreign language]. The following question will be presented by Lee Sun Jung from Bank of America. Please go ahead with your question.
Sun Jung Lee (Analyst)
[Foreign language].
Hee Jun Chung (IRO)
I'm Lee Sun Jung from Bank of America. Thank you for this opportunity. My first question is related to your AI business. You mentioned about possibly introducing a subscription model for A. within this year, and if you can provide us with more details, we'll be able to better understand how you're going to monetize using your AI business. Also, you've recently launched Aster for the global audience, and you mentioned it in your opening speech.
So if there's any more detail that you can provide us with, it would be great. My second question has to do with the marketing situation. In the fourth quarter, I can see that your marketing cost has gone down, and I'd like to understand any update on the marketing or the market competition situation. The handset subsidy ban was lifted in December last year, so I'd like to better understand how your marketing strategy will unfold in the near future.
Yang Seob Kim (CFO)
[Foreign Language].
Hee Jun Chung (IRO)
Thank you for your questions. Regarding your question on A., the Head of AI Business Strategy will address that, and for Aster, the Head of AI Growth Strategy will address that question. The Team Head of Marketing Strategy will comment on your question regarding our marketing expenses.
Jihoon Kim (Head of AI Business Strategy)
[Foreign language].
Hee Jun Chung (IRO)
This is Kim Jihoon, Head of AI Business Strategy.
Jihoon Kim (Head of AI Business Strategy)
[Foreign language].
Hee Jun Chung (IRO)
As you know, A. is Korea's number one personal agent, AI agent service with the largest number of customers in our customer base. And for the past year, we focused on advancing A. as a primary agent, and we utilized divergence strategy for external expansion.
Jihoon Kim (Head of AI Business Strategy)
[Foreign language].
Hee Jun Chung (IRO)
Before I comment on our plans for monetization, I'd like to elaborate more on this initiative and the kinds of approaches we're taking. We continue to advance A. as a primary agent so that we can offer A. phone service, which is an improved version of the existing phone call services, and we have been mobilizing our capabilities internally.
Jihoon Kim (Head of AI Business Strategy)
[Foreign language].
Hee Jun Chung (IRO)
For the evolution of this agent, we focus on making the agent not only engaging in some simple conversation or do search for users, but also be able to complete requested tasks. We will continue to test these functions to improve the user experience, and this is our priority.
Jihoon Kim (Head of AI Business Strategy)
[Foreign language].
Hee Jun Chung (IRO)
As A. has already established itself as a leading personal AI agent through service improvements last year, we believe that we have a strong foundation for the introduction of paid services. No specific decisions have been made yet on how we're going to go about it, but our first consideration will be utilizing the subscription model.
Jihoon Kim (Head of AI Business Strategy)
[Foreign language].
Hee Jun Chung (IRO)
We're working on offering services for daily task management as well as search and combining it with other telecom features. We're working on plans for specific services, and we're also considering various bundled offerings in order to generate synergies with other services that SK Telecom is offering. We're working on all these plans, and when we have more details to share, we will make sure to communicate them with the market.
Jaeshin Lee (Head of AI Growth Strategy)
[Foreign language].
Hee Jun Chung (IRO)
This is Lee Jaeshin, Head of the AI Growth Strategy for Global Business of the Personal AI Agent. We unveiled Aster, an agentic AI service at the SK AI Summit last year, and currently a closed beta testing is ongoing. This year in January, we showcased the service demonstration at CES 2025.
Jaeshin Lee (Head of AI Growth Strategy)
[Foreign language].
Hee Jun Chung (IRO)
Unlike other AI services that simply respond to user prompts, Aster aims to be an agentic AI that can not only respond to user prompts but also execute necessary daily tasks through communication with users.
Jaeshin Lee (Head of AI Growth Strategy)
[Foreign language]
Hee Jun Chung (IRO)
We plan to start an open beta service in the U.S. for U.S. customers in the first half of the year, which will include some of the key use cases such as creating meal preps and also working on weekend preps, as well as managing all these schedules and executing necessary actions.
Jaeshin Lee (Head of AI Growth Strategy)
[Foreign language].
Hee Jun Chung (IRO)
For this, we're accelerating collaboration with diverse tech partners such as Perplexity, and we're also at the same time actively pursuing partnerships with global telecom companies who can benefit from agentic AI services.
Jaeshin Lee (Head of AI Growth Strategy)
[Foreign language].
Hee Jun Chung (IRO)
As we're still preparing for an official launch, please understand that it is too early to discuss any specific business models, but I'd like to ask for your continued interest in this process of developing and launching the service. Thank you.
[Foreign language].
This is [audio distortion] from the Marketing Strategy Team. After the abolishment of handset subsidy ban at the end of 2024, there were some news reports on how certain sales offices offered huge subsidies, but this was a limited phenomenon, mainly to get rid of handset inventory.
[Foreign language].
The current market situation is very different from when the subsidy ban was introduced. As the unit shipment cost of handsets continues to increase and the handset replacement cycle of customers continues to lengthen, we've seen more stability in the market, and the size of the market itself has been reduced.
[Foreign language].
In the fourth quarter, there were no signs of over-competition in the market, and the market is likely to wait for a new enforcement decree of the Korea Communications Commission to come up with response strategies. We will continue to monitor the market situation closely.
[Foreign language].
Going forward, we will continue to create momentum in the market to offer more personalized and differentiated value to our customers.
Operator (participant)
[Foreign language]. The following question will be presented by Jeong Jisoo from Meritz Securities. Please go ahead with your question.
Jisoo Jeong (Analyst)
[Foreign language].
[Foreign language].
[Foreign language].
[Foreign language].
[Foreign language].
[Foreign language].
Hee Jun Chung (IRO)
This is Jeong Ji-soo from Meritz Securities. I would like to ask a question on the impact of operation improvements on your earnings. How much was the impact coming from the OI in 2024, and what is your outlook on the impact of your operation improvement initiative in 2025? If possible, please provide us with the guidance on 2025 CapEx plan.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Thank you for the question.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
We have been implementing operational improvements across the company to ultimately strengthen our fundamental competitiveness of the telecom business and also secure a basis for AI-related growth investments.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Operational improvement can be achieved mainly through OpEx savings, CapEx efficiency, and also disposal of non-core assets. In addition to company-wide cost saving efforts, we also shifted our CapEx paradigm to focus on network quality improvement, which our customers can enjoy as CapEx is our major cash outflow category, while at the same time restructuring the business portfolio centered on AI.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
As a result, we were able to increase our operating income by 4% and reduce CapEx while maintaining a strong 5G subscriber base. Net borrowings were also reduced through free cash flow improvement, and these efforts helped strengthen our fundamentals to transform into an AI company.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
We will continue with operational improvements this year as well so that this initiative is not short-lived but is maintained sustainably. We will develop growth plans optimized for each business model in our telco and AI businesses and allocate resources in a balanced manner so that we can achieve a bottom-line growth and cash flow improvement much more so than what we achieved in 2024.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
As for our CapEx plan, we cannot disclose any specific number, but we're planning to optimize CapEx for efficient network operation for the benefit of customers and strategic AI growth investments. The medium to long-term stabilization trend for CapEx is going to continue.
Yang Seob Kim (CFO)
[Foreign language].
Operator (participant)
[Foreign language].
Yang Seob Kim (CFO)
[Foreign language].
Hoi-Jae Kim (Analyst)
[Foreign language]. The following question will be presented by Kim Hongsik from Hana Securities. Please go ahead with your question.
Hongsik Kim (Analyst)
[Foreign language].
Hee Jun Chung (IRO)
I'm Kim Hong-sik from Hana Securities. My first question is related to the stock price trend. Recently there was a reversal of stock prices between KT and SK Telecom, and I believe it is mainly because of uncertainty surrounding long-term dividend payout from SK Telecom. Based on what you discussed today, it seems that it's not very optimistic for SK Telecom for shareholders and investors to expect. There are still concerns over the future stock price trend of SK Telecom. What is your outlook or view on your stock price going forward? Secondly, SK Telecom's IR releases and other press releases often mention becoming an AI company, but in reality, there aren't many companies who are able to generate profit using AI. When I actually visit SK Telecom's sales offices, I don't get the impression that they are focusing on AI. You've been talking about using AI for profit generation for some time, so I'd like to understand if you have any plans for B2C price plan or pricing for B2C as well as bundling of AI with your MNO price plans. Thank you.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Thank you for your valuable questions. I'd like to comment on your first question.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
You mentioned about market cap, and back in 2021, there was a spin-off from SK Telecom so that we split off SK Hynix and T-Map Mobility and other non-telecom businesses as SK Square. The combined market cap of SK Square and SK Telecom is currently more than KRW 24 trillion. After the spin-off, we continue to focus on AI business and telecom business in order to improve our corporate value.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
As you point out, shareholder return is an important factor that determines stock price in the market. However, as you may know very well, market valuation does not just reflect shareholder return but also reflects other factors, including future growth potential.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
We know that 2025 will be a very important year where we need to demonstrate the effect of AI business to the market, and we are going to produce tangible results through AI investment and business partnerships and cooperations so that we can show to the market that our AI business is competitive. As part of that plan, starting from this earnings conference call, we will continue to announce specific AI-related revenue and other figures.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
As I mentioned earlier, the additional financial resources that we secure from business operation and operation improvements will be used in diverse areas to boost our corporate value, including growth investments, financial structure improvement, and acquisition of equity of SK Broadband. We will use these resources in a balanced manner.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
I would like to reiterate that SK Telecom will continue to maintain the best or the highest level of shareholder return in the industry in a stable manner, and we are committed to sharing additional fruits of growth investments with shareholders.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
About your second question, the head of the marketing strategy team will address.
[Foreign language].
I am [audio distortion] from the Marketing Strategy Team. To give you the answer right away, we do not have any specific plans yet when it comes to including AI B2C services such as A. to our MNO price plans.
[Foreign language].
As Mr. Kim, the head of AI business strategy, elaborated, there will be continuous results coming from A. operation, and there is a plan to introduce a paid service within this year. I believe that these types of AI B2C services that are popular among users can strengthen the competitiveness of our MNO products. When we have more details coming out from the monetization of A., we will, of course, consider the option of bundling A. with our mobile price plans.
[Foreign language].
I believe the investors well understand the product and service competitiveness of SK Telecom with our attractive price plans. We will continue to make sure that our competitiveness is further strengthened by developing diverse price plans to satisfy the needs of users and launching them at the right time.
[Foreign language]. The following question will be presented by Kim Jonsoop from KB Securities. Please go ahead with your question.
Jonsoop Kim (Analyst)
[Foreign language].
Hee Jun Chung (IRO)
I'm Kim Jonsoop from KB Securities. Thank you for this opportunity. I'd like to ask questions on your AI infrastructure and AIX business. Recently, a very affordable and cheaper AI model such as DeepSeek has been introduced in the market, and I'm sure it has had some impact on your AI infrastructure business. If you can elaborate more on that, we'll appreciate that. You can also comment on that in connection with your AIDC business that you're pursuing at the SK Group level.
My second question is related to your AIX business. I'm sure that it is critical for SK Telecom to show how much visible or tangible results you can produce from your AI business. I would appreciate it if you can provide us with more details on specific business models that you are considering or pursuing as part of your AIX business. You mentioned that you're expecting about 30% growth in revenue in 2025. Which business models within AIX are expected to contribute to this revenue growth?
Hoi-Jae Kim (Analyst)
[Foreign language].
Hee Jun Chung (IRO)
Thank you for the question. Your first question will be addressed by the Head of AIDC Development, and the second question on AIX business will be addressed by the Head of AIX Business Development.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
I am Lee Hyun Woo, Head of the AIDC Development. I'd like to comment on specific plans that we're pursuing for AIDC business and as well as the impact of AI models like DeepSeek on expected growth in demand for AIDC infrastructure.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
As the full-fledged AI era arrives, we're witnessing an evolution from real estate-based colocation data center business to AI data center business with IT capabilities.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
The core of AI data centers is to be able to provide continuous AI computing power that can process massive AI workloads, which requires high technological capabilities in the areas of high-performance computing power represented by GPUs, high-efficiency power supply to provide maximum computing power, and the operational solutions or DCIM that can organically link these within a limited physical space.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
The kinds of required technological capabilities that I just mentioned cannot be secured by any individual companies on their own. So what we're doing is implementing plans to build the most affordable and most efficient data centers by pulling together and utilizing the kinds of capabilities possessed by major affiliates of SK Group at the group level.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
The kinds of data centers that SK will offer will utilize high-tech capabilities that exist within the SK Group and our partner companies. To give you some examples, SK Hynix has the world's best HBM and other advanced chip solutions in the computing power area, and SK Energy affiliates and partner companies have low-carbon LNG power generation, small modular reactors, fuel cells, and other eco-friendly energy solutions. We're going to pull together all these capabilities to offer the best data centers possible.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
Within this framework, SK Telecom is focusing on developing and operating a data center management solution or DCIM that is used for optimal operation of AI data centers. In doing so, SK Telecom will orchestrate the AI data center ecosystem and continue to further develop this ecosystem.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
In the process of creating and developing the AI data center ecosystem, there are multiple bottlenecks that we expect in the value chains, and SK will continue to develop and utilize these bottlenecks as an opportunity for new business models and new business opportunities.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
Based on these synergies that we can create, we're considering a plan to build a hyperscale AI data center in a location not within Seoul, and in the medium to long term, we are planning to scale it up so that it can become an AI data center hub in the Asia-Pacific region.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
Secondly, I'd like to talk about the implications of DeepSeek and other similar, more affordable and less infrastructure-intensive models.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
Even though the scale of resources invested in the development of DeepSeek has not been confirmed, the emergence of cost-effective AI models could actually serve as an opportunity to promote the growth of the AI infrastructure market, such as AI data centers.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
As development costs for services will continue to go down, more companies will accelerate the adoption of AI, and as various application services continue to emerge based on these inexpensive AI models, we believe that the demand for AI infrastructure to support them will also increase.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
These AI models need to continue to improve through learning and training, and this will lead to more demand for computing power, so I believe that the recent trend has a positive impact on our AI infrastructure business.
Hyun Woo Lee (Head of AIDC)
[Foreign language].
Hee Jun Chung (IRO)
We're not just aiming at providing high-capacity computing power, but we aim to build the most affordable and efficient data centers in terms of computing power, power supply, and operation, and to supply an AI infrastructure solution package based on this. We will respond flexibly to market changes and create an AI infrastructure ecosystem optimized for them.
[Foreign language].
I'm [audio distortion], Head of the AIX Business Development. Let me comment on your question on our current status and expected revenue for 2025 from AIX.
[Foreign language].
Our AIX business consists of, 1) existing AI-related B2B business such as AI Vision and AICC, and 2) AI Cloud business that provides cloud computing power, and 3) AI Use Case business that supports corporate clients' AI transformation using SK Telecom's AI technology such as GenAI.
[Foreign language].
To give you more details by these business types, first of all, AI cloud refers to cloud MSP business that provides GPU and CPU computing power, and it is a very solid business model that accounts for about two-thirds of the total AIX revenue, and its revenue growth in 2024 was already more than 20%.
[Foreign language].
Moving on to the AI B2B business such as AI vision and AICC, revenue grew more than 30% year-over-year in 2024 to KRW 60 billion, and we aim to accelerate growth this year with a target revenue growth rate of more than 30%.
[Foreign language].
Finally, the AI use case business is a new business area where SK Telecom, SK Broadband, and SK C&C are working as one team. We aim to innovate the way SK Group conducts business by applying AI agents to diverse work domains, and based on these results, we're planning to turn it into an actual business model for external customers to produce meaningful revenue.
[Foreign language].
To give you more details, the AI Use Case business has basically three main products. First, A. Biz, which automates not only common tasks such as meeting minutes generation, but also specialized tasks such as legal and tax affairs. The second product is Market Intelligence, which supports decision-making through predictions on commodity trade such as LNG, and finally, the Manufacturing AI product that improves R&D efficiency using AI in the manufacturing sector.
[Foreign language].
This year, we will focus on expanding and working on these three major AI use cases to our SK Group affiliates to secure best practices and references, and later we plan to expand the business to external clients to produce sizable results.
[Foreign language].
The AIX business revenue in 2024 was KRW 193 billion, and our growth target for 2025 is 30%. It still takes up a small portion in the total revenue of SK Telecom, but we will demonstrate the potential of using AI for profit generation by driving meaningful revenue growth from our AIX business.
Yang Seob Kim (CFO)
[Foreign language].
Hee Jun Chung (IRO)
Thank you. With this, we would like to end this earnings conference. If you have any further inquiries, please contact the IR team. Thank you.