SK Telecom, one of the nation’s three telecom service providers, is likely to emerge as one of the rising stars on the stock market next year. On top of an expected rise in profit in the telecommunication sector, SK Telecom will likely see its subsidiaries, including SK Planet and SK Hynix, log better business performances in that time. In this regard, their stocks, which declined to the low 200,000s following the announcement of the 3rd quarter business results in November, are expected improve. 

SK Telecom’s 2016 business performance failed to impress. The nation’s largest telecom service provider posted 4.243 trillion won in sales and 424.3 billion won in operating profit in the 3rd quarter of the year. The figures represent a 0.4 percent decline and 13.5 percent plunge, respectively, compared to those in the same period of last year. A halt in the sales of the Gallaxy Note 7 led to SK Telecom’s subsidiary PS&M’s decline in profit. Other subsidiaries, including SK Planet and SK Hynix, turned in poor business 3rd quarter results. 

A report by Hana Financial Investment showed that SK Telecom is predicted to post 17.096 trillion won in sales during the whole of 2016, a decline from last year’s 17.136 trillion won and 1.708 trillion won in operating profit, a 5.5 percent drop from last year’s 1.614 trillion won. SK Telecom’s financial results this year are in contrast with KT and LG U+, both of which have maintained growth. 

A market consensus shows that SK Telecom will likely have better business performances than its rivals next year, however. SK Telecom is forecast improve upon its sales in the telecommunications business, as a selective subscription system in which subscribers using the same smartphones for more than two years are given a 20 percent discount in monthly phone bills in return for not receiving pre-noticed subsidies is set to expired. The telecom service provider introduced the system in October 2014. SK Telecom has a subscription membership of 10 million, about 80 percent of which own big-ticket premium smartphones. 

Kim Heung-shik, a researcher at Hana Financial Investment, said, the introduction of the selective subscription system has caused a 30 percent drop in sales in the communications business. Given the situation in which a surge in the number of new subscribers is unlikely, SK Telecom is more likely to see its sales turn around by a wide margin, he added. 

An expected improvement in business performances on the part of SK Telecom’s subsidiaries is also a boon to the telecom service provider. SK Planet, specializing in platform businesses, which maintains one-digit growth, is expected to see losses decline from 350 billion won in 2016 to 270 billion won in 2017. In particular, business costs related to the issuances of coupons by 11ST, one of the causes in the company’s losses, is likely to decline next year, analysts agree.

SK Planet is most likely to strike a deal to attract investments next year, according to analysts, boosting the outlook for an improvement of the company’s overall financial results. Earlier, SK Planet is seeking to nurture new businesses by attracting investments. Foreign investors, including Chinese, are sounding out investment opportunities of the company whose corporate value stands at an estimated 4 trillion won. If SK Planet succeeds in attracting FDI, it will likely also cause SK Telecom share prices to rise, they said. 

There are mixed market views on how much SK Planet’s corporate value standa at, and if SK Planet succeeds in attracting foreign investments, it means the company’s corporate value standing at 4 trillion will be proven, so SK Telecom’s corporate value will likely also be reevaluated. 

The outlook for SK Hynix in 2017 appears to be rosy. The company’s rising profit could lead to a rise in dividends, which is partly expected to creep into the bottom line of SK Telecom, one of the causes in the improvement of SK Telecom’s business performances. SK Telecom is one of companies dishing out higher dividend yield ratio as the dividend season is around the corner. SK Telecom’s expected dividend yield ratio is expected to stand at about 4.4, surpassing KT’s 2.6 percent and LG U+’s 2.2 percent.