2H16 Telecom Industry Outlook

Telecom Service
Solid downside support and decent growth
potential
In late phase of LTE era: Consumption diverging and becoming rational
LTE technology came to Korea in end-2011. Nearly five years later, the domestic
telecom service industry is now entering the late phase of the LTE era. During the
initial high-growth phase, early adopters purchased expensive handsets and
subscribed to high-priced rate plans. Now, telecom service consumption trends are
changing. 1) First, consumption is diverging, with the gap between telcos’ average
rates and MVNO rates widening further this year, compared to 2012. 2) Second,
consumers are becoming more rational. Low- to mid-end handset purchases out of
all purchases are estimated to be near 30%, from less than 10% in 2012. In addition,
the cumulative number of subscribers who have chosen a rate discount in lieu of
subsidies has surpassed 10% of overall mobile subscribers.
Risks from telecom plan restrictions; Opportunities from growing data
usage and business expansion
The most serious threat to telcos in 2H should be downward pressure on plan
prices. Once the new National Assembly takes office in June, a revision to the
handset distribution act and a bill related to telecom plan restrictions will likely be
proposed. With ARPU growth slowing and service rate discounts being booked as
sales discounts, telcos must find ways to deal with the growing pressure to lower
telecom bills. In our view, they could point to the following facts to justify current
rates: 1) Telecom expenses as a percentage of household spending have steadily
decreased over the past decade. 2) Handset purchase expenses are a bigger driver
of household spending growth than service plans. 3) Data plans are cheaper in
Korea than in other countries.
On the bright side, we believe telcos will find opportunities from high-priced rate
plans amid growing data usage. In addition, telcos are expanding aggressively into
new business areas, with a particular growing influence in the media business.
Furthermore, capitalizing on nationwide IoT networks, telcos are planning full-
swing launch of low-power wide-area network (LPWAN) services.
2H: Attractive dividend payout; Aggressive expansion; Retain Overweight
Free cash flow at domestic telcos is improving markedly. Capex has been on the
downswing in the era of advanced telecom technology, while variable costs have
also decreased due to stable marketing competition. Given stable earnings and
ample cash flow, we expect telcos to show attractive dividend payout. If shares
correct due to regulatory risks, high dividend yields should provide downside
support. Telcos’ growth prospects also appear decent in light of their aggressive
business expansion.
We retain our Overweight rating on the telecom sector. In the short term, we
recommend KT in light of its high earnings visibility and dividend growth. And from
a longer-term perspective (through the end of the year), we recommend SK
Telecom (SKT) given its high dividend payout and aggressive business expansion.
Overweight (Maintain)
2H16 Outlook Report
June 3, 2016
Mirae Asset Daewoo Co., Ltd.
[Telecom Service / Media]
Jee-hyun Moon
+822-768-3615
jeehyun.moon@dwsec.com
Nu-ri Ha
+822-768-4130
nuri.ha@dwsec.com
Korean telecom service industry index long-term trend: Key variables are ARPU,
dividends, and new businesses
Note: KOSPI dividedby 50 to show on same axis as telecom index; Telecom index is FTSE KoreaTelecom Index;
Source: Thomson Reuters, respective companies’ data, Mirae Asset Daewoo Research
25
30
35
40
45
50
28,000
30,500
33,000
35,500
38,000
04 05 06 07 08 09 10 11 12 13 14 15 16F 17F 18F
(p)(W)
AverageARPUof threebigtelcos(L)
Telecomserviceindustryindex(R)
KOSPI/50(R)
LTE
introduction
[Increaseddividends; Newbusinesses]
Downsidesupport, growthpotential
Telecomsector
tradingrange
mayrise

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June 3, 2016
Mirae Asset Daewoo Research
C O N T E N T S
Industry trends: Entering late phase of LTE era 3
1. Consumption diverging 3
2. Consumers becoming increasingly rational 4
3. Cash utilization 5
Risks in 2H: Regulations 6
1. Pressure to cut telecom rates 6
2. How to handle growing pressure to lower monthly bills 7
Opportunities in 2H16: Growth strategy 9
1. Wireless 9
2. Media 14
3. Internet of Things (IoT) 20
Investment & valuation 22
1. Attractive dividend yields 22
2. Investment strategy 23
3. Valuation comparison 24
KT (030200 KS) 25
SK Telecom (017670 KS) 28
LG Uplus (032640 KS) 31

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June 3, 2016
Industry trends: Entering late phase of LTE era
1. Consumption diverging
LTE technology came to Korea in end-2011. Nearly five years later, the domestic telecom
service industry is now entering the late phase of the LTE era. During the initial high-growth
phase, early adopters purchased expensive handsets and subscribed to high-priced rate
plans. Now, telecom service consumption trends are changing.
First, consumption is diverging. While subscribers to relatively high-priced LTE plans are
expanding, MVNO subscribers are also growing. Currently, MVNO subscribers account for
10.5% of overall subscriptions, and this figure is expected to grow to roughly 15% by year-
end. And the gap between telcos’ average rates and MVNO rates has been widening further
this year compared to 2012.
In France and Japan, which introduced MVNO before Korea, MVNO subscribers make up
10% and 17% of overall subscribers, respectively. Despite the later introduction, Korea has
seen a swift increase in MVNO subscribers, aided by the government’s support and
promotion and strong marketing activities by CJ HelloVision.
Figure 1. Consumption is diverging, as subscribers to high-priced LTE plans and low-priced MVNO
plans are growing simultaneously
Source: MSIP, Mirae Asset Daewoo Research
Figure 2. The ARPU gap between traditional telcos (MNOs) and MVNOs is widening
Note: ARPU = average revenue per user
Source: Respective companies’ data, Mirae Asset Daewoo Research
0
1
2
3
4
5
6
7
0
10
20
30
40
50
1/13 7/13 1/14 7/14 1/15 7/15 1/16
(mnpeople)(mnpeople)
Number of LTEsubscribers(L)
Number of MVNOsubscribers(R)
W10,728difference
W14,642difference
15,000
20,000
25,000
30,000
35,000
40,000
1Q12 1Q13 1Q14 1Q15 1Q16
(W)
AverageMNOARPU
AverageMVNO(CJ HelloVision) ARPU

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June 3, 2016
2. Consumers becoming increasingly rational
Consumers are becoming increasingly rational in choosing telecom services. An increasing
number of subscribers are opting for a rate discount instead of subsidies when purchasing
handsets. The option to receive a discount upon purchase was introduced in October 2014,
and in April 2015, the government increased the discount to 20% (from 12%). Starting this
year, consumers can look up whether discounted rates are available to them.
The handset distribution act placed a ceiling on subsidies. In addition, for premium models,
initial subsidies are minimal, prompting consumers to opt for discounted rates.
Low- to mid-end handset purchases out of all purchases are estimated to be near 30%, from
less than 10% in 2012. The average selling price at global handset producers declined to
US$291 in 2016, from US$386 in 2012.
Overall improvement in smartphone specifications has contributed to the growth of
low/mid-end phone sales. In efforts to boost sales volume, handset makers have been
lowering the prices of premium models and/or expanding their low/mid-end lineups.
Domestic telcos’ launch of low/mid-end handset brands—namely SKT’s LUNA—also
contributed to an increase in subscribers.
Figure 3. Cumulative number of subscribers opting for discounted rates is growing, prompted by
increase in discount and introduction of discount eligibility inquiry service
Figure 4. Proportion of mid/low-end mobile phone purchases recently reached 30%, from below
10% in 2012
Note: Low/mid-end phones defined as those pricedbelow W500,000
Source: MSIP, ATLAS, Mirae Asset Daewoo Research
0
10
20
30
40
2012 2013 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
(%)
Proportionof low/mid-endsmartphonepurchasesout of all purchases
0
2
4
6
8
10
12
0
2
4
6
8
10/14 1/15 4/15 7/15 10/15 1/16
(%)(mnpeople)
Cumulativenumber of subscribers optingfor discount (L)
Proportionof all mobilesubscribers(R)
4/15:
Raiseddiscount to
20%from12%
1/16:
Starteddiscount
eligibility inquiry
service
10/14:
Introductionof discountedrateoption

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June 3, 2016
3. Cash utilization
Free cash flow at domestic telcos is improving markedly. Capex has been on the downswing
in the era of advanced telecom technology, while variable costs have also decreased due to
stable marketing competition. Given stable earnings and ample cash flow, we expect telcos
to show attractive dividend payout.
Thanks to its stable cash flow, we believe the telecom services industry will stay relatively
immune from the wave of restructuring now affecting many other domestic industries.
However, telcos’ revenue growth has slowed from the early stage of LTE. Thus, they are
making various efforts to revitalize growth based on their surplus cash.
SKT has seen its free cash flow improve since 2013. The company has used its surplus cash
to pay out dividends and purchase treasury shares. This year, the company is expanding
investments in new businesses, including the acquisition of CJ HelloVision (which is now
awaiting government approval). Meanwhile, SK Planet, SKT’s consolidated subsidiary, is
strengthening the competitiveness of its online/mobile shopping mall 11th Street based on
its cash and via external financing.
KT, too, has seen positive cash flow trends; free cash flow turned positive in 2015, and thus
the company resumed dividend payments last year. And LG Uplus is increasing dividend
payments, as its free cash flow also swung to positive territory in 2015.
Figure 5. SKT: Capex has been on the downswing, and FCF has
improved since 2013
Figure 6. SK Planet to bolster mobile commerce based on its
cash and via external financing
Note: Basedon non-consolidatedK-IFRS; Dividendpayout amount shown is
provision for the next year basedon cash flow
Source: Company data, KoreaRatings Corporation, Mirae Asset Daewoo Research
Source: KoreaRatings Corporation, Mirae Asset Daewoo Research
Figure 7. KT: Capex has decreased, and FCF turned positive in
2015
Figure 8. LG Uplus: Capex has decreased, and FCF also swung
to positive in 2015
-1
0
1
2
3
4
5
2011 2012 2013 2014 2015
(Wtr)
Capital expenditure
Purchaseof treasurystock
Dividendpayout
Freecashflow
-2
-1
0
1
2
3
4
5
2011 2012 2013 2014 2015
(Wtr)
Capital expenditure
Dividendpayout
Freecashflow
-2
-1
0
1
2
3
2011 2012 2013 2014 2015
(Wtr)
Capital expenditure Dividendpayout Freecashflow
-400
-200
0
200
400
600
800
1,000
2011 2012 2013 2014 2015
(Wbn)
SKPlanet net cash
SKPlanet freecashflow
Planningtosecure
additional W1tr
throughexternal
investment, including
W500bnfromIMM

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June 3, 2016
Risks in 2H: Regulations
1. Pressure to cut telecom rates
The most serious threat to telcos in 2H should be downward pressure on plan prices. Once
the new National Assembly takes office in June, a revision to the handset distribution act
and a bill related to telecom plan restrictions will likely be proposed. As of now, both the
ruling and opposition parties have agreed on the necessity of revising the handset
distribution law to ease households’ telecommunications cost burden.
In addition to a separate subsidy disclosure scheme and separation of phone distribution
and phone services, measures to abolish the base fee and apply caps on handset subsidies
are also being discussed. Such policy trends should negatively affect telcos’ earnings.
With regard to potential abolition of the base fee, the plans that include base fees are
mostly usage-based schemes that were more common in the past, when voice calling was
popular. Today’s data-centric tariff schemes are mostly fixed-rate plans that do not charge
base fees. As such, abolition of the base fee would likely not have a meaningful impact on
telcos’ earnings.
SKT’s standard plan sets its base fee at W11,000 (or W12,100, including the surtax), with
voice calls charged at W1.8/s (inclusive of 50 free text messages). The National Assembly has
also set the base fee target at W11,000. Subscribers are mostly feature phone users,
because the data rate (W0.25/0.5KB) is not attractive to smartphone users. Meanwhile, the
carrier’s Band Data plans (for LTE services) are offered in eight different tiers (according to
the amount of data), and a fixed sum is charged depending on the tiers. These plans do not
charge base fees.
As the amount of subsidies given to handset buyers is already lower than the subsidy cap
on average, and call/data plan discounts are being opted for widely (by subscribers that
choose to buy phones without subsidies), removing subsidy caps is unlikely to have as
strong an impact on telcos as the mounting pressure to lower telecom bills.
Table 1. Telecom-related bills (estimate)
The Minjoo Saenuri People's Party Justice Party
Plan/
Position
Submit revisionstoMCTDSIA Submit revisionstoMCTDSIA
Recognize the need to revise
MCTDSIA
Recognize the need to
revise MCTDSIA
Details 1. Removalof subsidiary caps 1. Removalof subsidiary caps
* The People'sPartyand theJusticeParty haveyet to state their
viewsonMCTDSIArevisions, except that theydid notbelieve
the revisionwould effectivelylowerhousehold mobilebills.
- Lowerhousehold mobilebills - Encourageprice competition
2. Removalofbasefees 2. Reductioninbasefees
- Lowerhousehold mobilebills - Reducehousehold mobilebills
3. Separation of subsidies (carriers
and manufacturers)
3. Separation of subsidies
(carriers and manufacturers)
- Ensuretransparentbusiness
practicesofcarriersand their
retailers
- Ensuretransparentbusiness
practicesofcarriersand their
retailers
4. Introductionoftheblacklist system
- Preventcollusionbetweencarriers
and manufacturers
- Promotefair competition
Source: Mediareports, Mirae Asset Daewoo Research
Figure 9. Simple usage-based monthly plan with base fee of
W11,000
Figure 10. Data-centric monthly plan with no separate base
fee
Source: SKT, Mirae Asset Daewoo Research Source: SKT, Mirae Asset Daewoo Research

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June 3, 2016
Table 2. Reduction of phone bills
Date Details Remarks
Apr.2000 SKT reducesbase feesby11% PresidentDae-jung Kim
Jan.2003 SKT lowersvoicerates fromW21toW20 per10seconds
Mobile services accountfor7% of
household spending
June 2005 SKT cutsits mobilesign-up feebyW20,000 President Moo-hyunRoh
Sept. 2006 Governmentlowersdatarates for youthby 30%
Mobile services’shareinhousehold
spending fallsbelow7%
Jul. 2007
Governmentintroduces telecombundling
(internet/multimedia)services
Oct. 2007
SKT offers adiscountwhen subscribersmake callstousers
on the samenetwork
Jan.2008 SKT, KT, and LGUlower textmessagefees fromW30toW20
May 2008 Governmentraisesbundling discountsto 20% President Myung-bakLee
Sept. 2009 SKT cutsits mobilesign-up feeby30%(KTby20%)
Nov. 2009 SKT lowersitsmobile sign-up feeby28%
Mar. 2010 SKT startstochargevoicecallsper second
Dec. 2010 KT and LGUstarttocharge voice callsper second
Oct. 2011
SKT, KT, and LGUlowerbasefeesbyW1,000,and offer50
messagesfreeof charge
spending reaches6%
Aug.2013 SKT, KT, and LGUcutthemobile sign-up fee by 40% President Geun-hyePark
Aug.2014 SKT, KT, and LGUreduce themobile sign-up feeby50%
Oct. 2014
Governmentsetsthediscount rate for those signing up for
mobiletelecomserviceswithoutgetting device subsidies at
12percent.
Nov. 2014 SKT removes mobile sign-up fees
spending fallsbelow6%
Mar. 2015 KT and LGUremove mobile sign-up fees
Apr.2015
Governmentraises thediscountratefor thosenot
getting device subsidies to20%(from12%)
June 2015
CarriersdiscountdataplansbyW1,000(whilekeeping the
datalimitintact)
spending fallsto5.8%
Source: Respective company data, mediareports, Mirae Asset Daewoo Research
Figure 11. Paradigm change in telecom services: Voice calls Data
Source: KCC, Mirae Asset Daewoo Research
2. How to handle growing pressure to lower monthly bills
With ARPU growth slowing and service rate discounts being booked as sales discounts,
telcos need to come up with effective measures to deal with growing pressures to lower
telecom bills. In our view, they could point to the following facts to justify current rates: 1)
Telecom expenses as a percentage of household spending have steadily decreased over the
past decade. 2) Handset prices, rather than service plans, are driving households’ average
propensity to consume (APC) higher. 3) Data plans are cheaper in Korea than in other
countries.
Voicecall
centric
Datacentric
Education
Finance
+SNS
+LBS
Voice
Enter-
tainment
User convenienceenhanced via
multi-purposefunctions
Voice
communication

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June 3, 2016
Table 3. Household telecom expenses out of total income and expenditure: % of total consumption expenditure has fallen
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual
average
%chg.
Income(W’000) 2,631 2,788 2,898 3,038 3,200 3,391 3,432 3,632 3,842 4,077 4,162 4,302 4,373 4.0%
Household expenditure
(W’000)
2,147 2,277 2,366 2,475 2,584 2,718 2,776 2,961 3,115 3,217 3,262 3,356 3,373 3.5%
Consumption
expenditure (W’000)
1,700 1,797 1,872 1,945 2,016 2,114 2,149 2,287 2,393 2,457 2,481 2,551 2,563 3.2%
Telecomexpenditure(W) 125,530 131,233 131,342 132,199 134,287 133,984 132,468 138,646 142,909 152,359 152,792 150,350 147,725 1.3%
Postalservice (W) 278 253 256 220 257 194 173 214 253 242 238 287 308 0.8%
Telecom equipment
(W)
6,568 7,147 6,792 6,736 5,188 2,531 1,897 1,750 2,613 6,743 9,456 23,766 22,676 10.0%
Telecom service (W) 118,684 123,833 124,294 125,244 128,842 131,259 130,398 136,682 140,044 145,374 143,098 126,297 124,741 0.4%
Telecom expenditure
breakdown
Postalservice (%) 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2
Telecomequipment(%) 5.2 5.4 5.2 5.1 3.9 1.9 1.4 1.3 1.8 4.4 6.2 15.8 15.4
Telecom service (%) 94.5 94.4 94.6 94.7 95.9 98.0 98.4 98.6 98.0 95.4 93.7 84.0 84.4
Telecomexpenditure/
total consumption
expenditure
7.4 7.3 7.0 6.8 6.7 6.3 6.2 6.1 6.0 6.2 6.2 5.9 5.8
Averagepropensityto
consume(%)
77.9 77.8 77.9 77.6 76.6 75.9 76.6 77.3 76.7 74.1 73.4 72.9 71.9
Note: Nationwide monthly average totalincome andexpenditure per household(at least 2 people); Annualaverage %change is basedon 2003-2015
Source: NationalStatisticalOffice, householdsurvey data, Mirae Asset Daewoo Securities Research
Figure 12. Telecom equipment is among the top three items
contributing to increase in household APC
Figure 13. Telecom service is topitem contributing to
decrease in household APC
Note: APC= average propensity to consume
Source: HRI, Mirae Asset Daewoo Research
Note: APC= average propensity to consume
Source: HRI, Mirae Asset Daewoo Research
Figure 14. Using 30GB of mobile data is cheaper in Korea than
in other countries
Figure 15. Mobile data cost per 1GB is also cheaperin Korea
Source: MSIP, respective companies’ data, Mirae Asset Daewoo Research Source: MSIP, respective companies’ data, Mirae Asset Daewoo Research
0
100,000
200,000
300,000
400,000
Korea AT&T(US) Google(US)
(W)
Cost of 30GBof data
0
10,000
20,000
30,000
40,000
50,000
60,000
Korea Google(US) Japan Verizon(US)
(W)
Cost per 1GBof data
0.61
0.53
0.52
0.0 0.2 0.4 0.6 0.8
Actual housingexpenses
Motor vehicle
Telecomequipment
Grouptravel expenses
Insurance
Cultural services
Other housing-related
services
Other transportation
(%p)
ItemscontributingtoincreaseinAPC
-1.03
-0.86
-0.79
-1.2 -0.9 -0.6 -0.3 0
Telecomservice
Fuel expensesonmotor vehicle
Higher education
Primaryeducation
Meals
Other service
Freshfisheries
Medicine
Overlandtransportation
Secondaryeducation
Dataprocessingequipment
(%p)
ItemscontributingtodecreaseinAPC

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June 3, 2016
Opportunities in 2H16: Growth strategy
1. Wireless
1) Wireless service
We believe one of the biggest opportunities for telcos is higher prices driven by higher data
usage. In April 2016, monthly LTE data usage per subscriber was up 33.3% YoY to 4.66GB.
Following the launch of data-oriented plans in May 2015, the average price level of data
plans slightly fell, whereas the amount of data available remained unchanged. Since then,
the number of subscribers has decreased for plans priced at W60,000 or above, but has
increased for plans priced in the W40,000-W50,000 range. In the short term, this is likely to
have an adverse effect on overall average prices.
In the medium term, however, we believe lower prices have eased the entry barrier to data
usage. The availability of plans offering more data at lower price points has made it easier
for customers, who previously used 2GB per month, to sharply increase their monthly usage
to 5GB.
At present, we believe video streaming accounts for roughly 80% of data usage. Every year,
data consumption tends to pick up in the third quarter, when the professional baseball
season gets underway. This year, several global sporting events are scheduled to take place,
including the Euro 2016 in June and the Rio 2016 Summer Olympics in August. Given the
huge popularity of these events and the differences in time zones, we expect to see a pickup
in data demand for mobile VOD.
Figure 16. Trend in LTE data usage per subscriber: Nearly 5GB per month
Figure 17. Subscriptions to W40,000-W50,000 monthly plans—corresponding to monthly LTE data
usage of 5GB-6GB—have increased recently
Source: MSIP, mediareports, Mirae Asset Daewoo Research
1
2
3
4
5
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
(GB)
2012 2013 2014 2015 2016
0
20
40
60
80
Jul-Sep14 10/14 12/14 1/15 3/15 5/15 7/15 9/15 11/15 12/15 1/16 2/16 3/16
(%)
BelowW30,000 BetweenW40,000andW50,000 Over W60,000
Handset
distributionlaw
takeseffect
Launchof data-
centricmonthly
plans

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June 3, 2016
Telcos are also seeking to encourage data usage and drive up prices by offering additional
services that can be added to basic plans depending on the subscriber’s need. Such services
include time- and location-based data plans, as well as plans optimized for viewing video
content.
Additional services are generally priced between W5,000 and W11,000 per month, with the
majority costing around W8,000. Historically, it took roughly a decade for telcos’ ARPU to
increase by W8,000. By offering a wider range of additional services, we think telcos could
further push up their ARPU.
Table 4. Optional mobile telecom services: Detailed services of various types are being offered at W5,000-W10,000 per month
Category SK Telecom KT LG Uplus
LTE
data
∙ “Premiumflexible option” ∙ “LTEegg+” ∙ “Unlimited freedata smartphone”
(offers50MB/dayinadditionto amount
included inbasicmonthlyplan)
(offerslarge amountofdata to various devices)
(connectdirectly to +Lite and internetthrough
smartphone)
∙ “Thankyou for yourservice” ∙ “Styleflexibledataoption” ∙ “Unlimited freedatapack”
(offersdatatosoldiers,both serving and
discharged)
(purchasableby Style monthlyplan
subscribers)
(offers1GBforweb surfing onsmartphone
and PDA)
∙ “FlexibleLTEoption” ∙ “LTEdata sharing”
(unlimited datafor“unlimited 75”plan
subscribers)
(abletoshare mobile data with otherdevices)
∙ “Free commute” ∙ “My timeplan”
(unlimited dataduring commuting time) (offersunlimited dataduring specifiedtimes)
∙ “Free subway” ∙ “FlexibleLTEQoSoption”
(unlimited data calling in subway) (offersunlimited data at alower speed)
∙ “Band free time” ∙ “Dataroaming”
(offers1GBduring commuting/lunchtime) (abletousedatain majorcountries worldwide)
Content
services
∙ “Band playpack” ∙ “Ollehcontentbox” ∙ “Video/entertainmentall together”
(offers2GBperdayforoksusu TV)
(app service providing variouscontent, suchas
webtoons)
(exclusive video service such asreal-time TV,
film,and VOD)
∙ “Oksusu freedata” ∙ “Ollehschoolpremium” ∙ “LTEvideoportalpack/videopack”
(offersunlimited dataforoksusuTV) (educationalapp serviceusableby allages) (offers3GBformedia consumption)
∙ “MelOn ex-streaming” ∙ “Unlimited TVplus” ∙ “LTEall/game/HDTV/music/Box”
(offersunlimited dataforMelOn music app) (unlimited TVbroadcasting service)
(offersdiscountonintegrated optional
services)
∙ “Oksusu” ∙ “Genie music” ∙ “Uflixdatapack”
(oksusu content/real-timebroadcast service)
(offersfull-yeardiscountto subscribers of
monthlyplan)
(offers5GBforfilms and US dramas)
∙ “HD streaming free”
(unlimited access to allmusic on Mnet)
Other
services
∙ “DataPlusT membership” ∙ “Ollehnavi” ∙ “Today’sweather”
(offers additionaldata whenusing
T membership discount)
(navigation service showing fastest routes
based onreal-time traffic)
(provides weather information8times/day
every 2hours)
∙ “T map navigation” ∙ “miTV”
(navigation service showing real-time traffic) (access various content suchasnews,sports)
∙ “Freedatafor11stusage” ∙ “Stockinvestmentnote”
(receive a textwithfinancial marketinfo. 3
times/day)
Table 5. Study on actual LTE usage: Similar preference for subsidies vs. service discount; 50% opt for add-on service after
subscription; 25% have paid excess charges
Factors considered when choosing telco Average Usagefrequencyof required additional services Average
1. Subsidiesfor handset 26.9% 1. Never 18.9%
2. Servicediscount, suchasintegrated discount or membership 25.5% 2. Almostnever 41.3%
3. Newest smartphone 18.3% 3. Sometimes 20.7%
4. Cheap monthlyplan 17.4% 4. Somewhatoften 16.8%
5. Brand image 9.5% 5. Often 2.3%
6. Other 2.4%
Total(N=1,054) 100.0% Average score on 1to5scale (N=518) 2.42
Experienceof adding optionalservice Average Experienceof paying excesscharge Average
Experience 52.5% Experience 24.1%
No experience 47.5% No experience 75.9%
Total(N=1,054) 100.0% Total(N=428) 100.0%
Source: KoreaConsumer Agency study on actualLTE usage conditions (2014), Mirae Asset Daewoo Research

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June 3, 2016
2) New spectrum investments
We believe telcos can also find growth opportunities in the new spectrums allocated in early
May, which will likely help telcos further enhance wireless speed and support growing data
usage. It remains to be seen whether higher data usage due to faster speeds will naturally
lead to higher prices.
SKT, which acquired 60MHz of bandwidth in the 2.6GHz band from the latest auction, plans
to roll out a faster LTE network nationwide by 2019. The advanced network will support
download speeds of up to 525Mbps through five-band carrier aggregation (CA) and up to
1Gbps through the additional application of 256 quadrature amplitude modulation
technology. That is more than 13 times the speed of the current LTE service and allows
users to download a two-hour long, high-definition movie in just 13 seconds.
Table 6. 2016 telecom spectrum auction: Details and refarming estimates
Category SKT KT LG Uplus Combined Govt. auction
Auctionresults Bid amount Totalonoffer
Winning bid (Wbn) 1,277.7 451.3 381.6 2,110.6
Secured block(s) D, E B C
Frequencyband 2.6GHz 1.8GHz 2.1GHz
Secured bandwidth (MHz) 60 20 20 100 140
Period ofutilization (years) 10 10 5
Estimatedannualper-MHzprice(Wbn) 10.6 11.3 19.1 12.5
Notes onsecured spectrum
Increasing global
demand inlinewiththe
proliferationofLTE
technology.
Easy tosecure compatible
equipment.
Usableimmediately after
paying deposit.
Networkinvestment
requirementby4th year:
65%forD,40% forE
(partial exemptionlikely)
Adjacentto
existing LTE
frequency
Usable
immediately after
paying deposit.
Network
investment
requirementby
4thyear: 40%
Adjacentto existing
LTEfrequency,
Usable starting year-
end after SKT returns
spectrum.
Networkinvestment
requirementby4th
year: 65%
25%ofauctionprice
mustbepaid in cash
within 90daysofthe
auction;Remaining
paymentstobe made
ininstallmentsduring
theperiod ofutilization
Expected impactofbid
Securing ofnew LTE
wideband
(60MHzin2.6GHz)
Possible
establishmentof
ultra-wideband
(55MHzin1.8GHz)
Possible
establishmentof
wideband
(40MHzin2.1GHz)
Frequencypurchase
tobepaid incash;
frequencieswillbe
recognized as
intangible assets
Secured
government
finances
totaling about
W2.1tr
Refarming estimates
2.1GHzrefarmingpriceestimates(Wbn) 545.6 545.6 (notapplicable) 1,091.2
-3%ofrevenue
(calculatedbygovernment,Wbn)
164.0 164.0
-Tiedto2.1GHzCblockbid(Wbn) 381.6 381.6
Bandwidthtoberefarmed(MHz) 40 40 80
Periodofutilization(years) 5 5
Totalestimate(auction+refarming)
Expectedspectrumspending(Wbn) 1,823.3 996.9 381.6 3,201.8
Amountofbandwidth(MHz) 100 60 20 180
Expectedannualper-MHzspending(Wbn) 11.8 12.9 19.1 13.0
NumberofLTEsubscribers
(Mar.2016,mnpersons)
19.5 18.2 10.2 47.9
LTE-possiblebandwidthpersubscriber(Hz) 7.9 5.8 9.8 7.5
SecuredLTEfrequency(MHz) 155 105 100 360
Totalsecuredfrequency(exceptWiBro,MHz) 185 125 120 430
Additionalannualamortizationcost
onfrequency(Wbn)
236.9 154.3 76.3
Note: Refarmingprice has not been confirmedandis thus basedon our estimates; Per-MHz price is convertedto 5-year utilization period; As SKT was simultaneously
awardedblocks D andE, network investment requirements for block E are exempted, but 50%of the requirements of block E must be investedin block D
Source MSIP, mediareports, relatedcompanies’ data, Mirae Asset Daewoo Research

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Figure 18. Newly allocated spectrums will likely help telcos further enhance wireless speed and
support growing data usage
Source: Mirae Asset Daewoo Research
3) Preparing for the 5G age
Domestic telcos are getting ready for the upcoming commercialization of 5G technology in
2020. Large-scale investments have not yet taken place, as the technology is not
standardized and still in the testing stages.
That said, with a trial service planned for the 2018 PyeongChang Winter Olympic Games, we
think domestic telcos will likely move ahead of other countries in developing 5G networks.
The 2018 trial service is targeting a speed of 10Gbps using an eight-band CA technology
that combines eight frequencies with 100MHz bandwidths. That would be 33 times faster
than the current maximum speed of LTE (300Mbps). As the official partner of the
Pyeongchang Olympics, KT plans to showcase a number of 5G-based media services, such
as virtual ski-jumping and video recording using drones.
Table 7. 5G trial service specifications for 2018 (expected)
5G trial service category Technology standard
Frequencybandwidth 800MHz(100MHz*8CA)
Numberof MIMOindex Max 8
Frame structure Independent structure
Channelcoding Low-densityparity-check (LDPC)code
5G-LTElinkage method 5G-LTEinter-link(necessary) and 5G solely (selective)
Subcarrier interval 75kHz
Duplexing method Dynamictimedivisionduplex (DynamicTDD)
Up-/downwind link structure Hybrid beamforming structure
Note: CA = Carrier Aggregation, MIMO = multiple-input andmultiple-output
Source: The Fourth 5G Strategy andPlanningCommittee, etnews, Mirae Asset Daewoo Research
Figure 19. 5G standardization and preparation timeline of threebig telcos; Commercialization
expected in 2020
Source: ITU, respective companies’ data, Mirae Asset Daewoo Research

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Figure 20. KT’s plan for demonstrating 5G service at 2018 Pyeongchang Winter Olympics
Source: Company data, Mirae Asset Daewoo Research

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June 3, 2016
2. Media
1) Pay-TV to reach an inflection point
Among the areas into which telcos are expanding, the media business deserves attention.
In November 2015, SKT announced its plan to acquire CJ HelloVision, the largest cable
system operator (SO) and the second-largest pay-TV operator in Korea.
Currently, cable SOs hold a 46% share in the pay-TV market, telco-affiliated IPTVs 40%, and
KT SKylife 14%. The market share gap between telcos and cable SOs has narrowed rapidly
amid the digital switchover. Compared to telcos and the satellite TV operator, which
adopted digital broadcasting systems from the very beginning, cable SOs have fallen behind
in areas such as service bundling discounts, number of channels, VOD lineup, etc.
KT has become the unrivaled leader in pay-TV services following its acquisition of KT Skylife
and aggressive service bundling discounts. If SKT wins government approval for the
acquisition of CJ HelloVision, the combined market share of telcos will rise further. While
telcos had been content with achieving organic growth in the media segment through
technology advancement and the digital switchover, they now seem more focused on
inorganic growth via M&As. This will likely signal an inflection point for the pay-TV market.
Figure 21. Major companies’ position in domesticpay-TV value chain
Figure 22. Pay-TV M/S by number of subscribed households
Note: Basedon end-1Q16
Source: KCTA, respective companies’ data, Mirae Asset Daewoo Research

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2) Pay-TV market status and outlook
Looking ahead, the pay-TV market is likely to be dominated by two big players, with the
market focus shifting from the digital switchover to mobile broadcasting and from
subscriber numbers to ARPU growth.
Consolidation: Market consolidation is expected to continue. In the past, consolidation
occurred among cable SOs; CJ HelloVision has acquired 17 regional SOs since 2006, and
IPTVs and the satellite TV operator gradually increased their subscriber base by absorbing
analog TV subscribers switching from cable SOs. In November of last year, however, SKT
announced its plan to acquire CJ HelloVision. Once approved, the acquisition deal will put
SKT in the second-highest spot in the pay-TV market (a 26% market share), after KT (30%).
From digital switchover to mobile: Following digital television transition, an increasing
number of viewers are moving away from traditional TV screens to mobile TV. As telcos now
roll out mobile-exclusive content and services (in addition to simply making existing TV
services available on the mobile platform), we have noted sharp traffic growth in their
mobile video apps. Moreover, Netflix recently introduced its video-streaming services in
Korea, and CJ E&M acquired Tving from CJ HelloVision.
ARPU growth: Going forward, ARPU growth will be a key management goal. So far, low B2C
ARPU (less than W10,000 per month; less than W4,000 for analog services) has been offset
by higher B2B revenue growth arising from SO fees paid by home shopping companies.
However, home shopping growth is slowing, and fee negotiations are at a standstill. In a
sense, highly profitable B2B revenue has been negative for B2C ARPU growth, as companies
could afford to undercut prices to increase the subscriber base. Pay-TV operators have
already monetized their B2C models, and thus can promote ARPU growth based on existing
models. Looking ahead, factors that may positively affect ARPU are: normalization of service
bundling discounts, enhancement in set-top box technology, and the spread of UHD TVs
and VOD services.
Figure 23. Domesticpay-TV M/S by number of subscribers:
Two dominant players expected to emerge
Figure 24. Mobile video app usage time: Recent rise in oksusu
Note: Assumingmerger of SKT and CJ HelloVision
Note: Mainly RMC(Ready Made Content) app
Source: Koreanclick, Mirae Asset Daewoo Research
Figure 25. Korean pay-TV monthly fixed rate is low compared
to other countries
Figure 26. US pay-TV market saw increasing ARPU in the later
phase of digital conversion
Source: MSIP, Informa, Bloomberg, Mirae Asset Daewoo Research Source: KCC, Bloomberg, Broadbandtvnews.com, Mirae Asset Daewoo Research
40
50
60
70
80
90
100
40
50
60
70
80
90
100
04 05 06 07 08 09 10 11 12 13 14
(US$)(%) NorthAmericabroadcast
digital conversionrate(L)
NorthAmericapay-TV
averageARPU(R)
ARPUfell
earlystageof
digital
conversion
ARPUrosein
later stageof
digital
conversion
0
5
10
15
20
25
30
35
05 06 07 08 09 10 11 12 13 14 15 16F
(%) KT SKTelecom
CJHelloVision T-broad
D'LiVE LGUplus
CMB Hyundai HCN
0
20
40
60
80
100
Korea US Australia Japan Singapore HongKong Indonesia
(US$)
0
100
200
300
400
500
600
700
15.4 15.7 15.10 16.1 16.4
(mnmin)
SKBroadbandoksusu Terrestrial pooq
KTOllehtvmobile LGU+LTEvideoportal
CJE&MTving SKTelecomhoppin
Netflix

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3) Changing competitive landscape in the pay-TV market
In the past, the main product of pay-TV service packages was wired broadband internet,
with other services offered as add-ons. KT quickly gained ground in pay-TV services by
bundling its dominant wired broadband service with IPTV. In the US, it was also wired
broadband internet service providers (Comcast, Time Warner Cable, etc.) who quickly
secured competitiveness in the pay-TV segment. Meanwhile, Verizon (wireless) and AT&T
(wired and wireless) are late entrants in this segment.
Now, wireless services (i.e., LTE) are believed to be the mainstay of pay-TV service bundling.
This suggests that the dominance of mobile carriers can be carried over to pay-TV
operations. The introduction of LTE services at end-2011 has allowed users to enjoy video
content on the mobile platform (thanks to fast data transmission). The synchronization of
broadband service and pay-TV subscriber growth has weakened since 2010, while that of
wireless service and pay-TV subscriber growth has strengthened. LGU lagged behind its
rivals in both wired and wireless services, but has gained market share in both segments
since the introduction of LTE.
Pay-TV operators’ subscriber share is restricted to up to one-third of the total market,
pursuant to the Internet Multimedia Broadcast Services Act revised in 1H15. (The market
share restriction clause will expire on June 28th
, 2018, but may be extended after discussions
at the National Assembly.) SKT’s potential acquisition of CJ HelloVision will not cause a
breach of this clause (post-acquisition market share is estimated at 26%). Thus, we expect
pay-TV service providers to continue to engage in marketing promotions and M&As in the
short term, until their respective market shares reach the limit.
Over the long term, we project that various broadcast-related laws, now segmented based
on technologies and time period, will eventually be integrated. Under the current laws,
technology convergence (e.g., dish convergence solutions that integrate IPTV with satellite
services) is illegal. From a consumer’s perspective, service lineups and bundling discounts
have a bigger impact on consumers’ decisions than technological differences among service
providers.
Figure 27. Before 2011, the main product of pay-TV service
packages was wired broadband internet
Figure 28. Now, wireless services (i.e., LTE) are believed to be
the mainstay of pay-TV service bundling
Source: MSIP, KCTA, Mirae Asset Daewoo Research Source: MSIP, KCTA, respective companies’ data, Mirae Asset Daewoo Research
Figure 29. CJ HelloVision: In absence of M&A, subscriber
growth is stagnating
Figure 30. LG Uplus: Similar trends in wireless, pay-
TV/broadband subscribers
Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
1.3
times
1.6
times
1.4
times
10
15
20
25
30
35
05 06 07 08 09 10 11 12 13 14 15 16F
(mn people)
Number of broadbandsubscribers
Number of pay-TVsubscribers
247 times
8.2
times
4.4
times
0
10
20
30
40
50
60
70
05 06 07 08 09 10 11 12 13 14 15 16F
(mnpeople)
Number of wireless subscribers
Number of LTEsubscribers
Number of IPTVsubscribers
4M&A
cases
1M&A
case
4M&A
cases
1M&A
case
0
200
400
600
800
1,000
0
1
2
3
4
5
10 11 12 13 14 15
('000people)(mnpeople) Number of broadcastingsubscribers (L)
Number of fixed-linebroadbandsubscribers (R)
8
9
10
11
12
13
0
1
2
3
4
10 11 12 13 14 15
(mn people)(mn people)
Number of broadcastingsubscribers (L)
Number of fixed-linebroadbandsubscribers (L)
Number of wireless subscribers (R)

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4) SK Broadband + CJ HelloVision
SKT plans to buy a 30% stake in CJ HelloVision from CJ O Shopping, and allow CJ HelloVision
to merge with SK Broadband. MSIP must approve/reject the acquisition plan (within 60 days)
following consultation with the Fair Trade Commission and KCC consent. However, MSIP’s
approval has been delayed, due to legislative and administrative issues involved in the
acquisition.
If approved, the merged corporation (SK Broadband + CJ HelloVision) will become a media
platform giant with capital of over W2tr and revenue of W4tr. Before acquiring CJ
HelloVision, SKT’s subscriber base consists of around 20mn wireless and 10mn pay-TV
subscribers. After the acquisition, the firm will have a more balanced subscriber base (over
20mn wireless and 20mn pay-TV subscribers), making it easier for the telco to offer
integrated services and maintain its customer base.
Table 8. Approval and screeningof CJ HelloVision’s acquisition by SKT and merger with SK Broadband
FairTradeCommission KoreaCommunications Commission Ministryof Science,ICTand FuturePlanning
Role Negotiationwith MSIP NotificationofpriorconsenttoMSIP Screening and result announcement
Screening
Registrationofstock acquisition and
business combination
Registrationofmerged corporation
MSO (or switch to MSO)approval
Registrationofmergerapprovalforlocation
informationservice businesses
Registrationofmergeroflocation-based service
providers
Approval for stockacquisitionbyfacilities-based
telecommunicationsbusinesses
Provisionofpublicservicebyfacilities-based
Merger approvalforfacilities-based
Authorizationof change inbroadcaster’s
biggestinvestor
Authorizationof changes resulting from
merger ofprogramproviders (T-commerce)
Approval of changes resulting frommerger of
IPTVbusiness
Approval of changes resulting frommerger of
MSOs
Screening
criteria
(estimate)
Assessment ofpotentialimpacton
market competition
- Whethermerged corporationwill
gain market share atleast 25%p
higherthan the second largest
player
-Criteriafordetermining amarket-
dominating company
(A companyholds amarketshareof
50%orhigher, orthelargest, second-
largest,and third-largestfirmshold a
combined market share of 75%or
higher)
△ Guarantee of accesstobroadcastservices
△ Diversityin sourcesofbroadcastservice supply
△ Protectionofrights and interestsofviewers (users)
△ Public accountability
△ Diversityin sourcesof content supply
△ Appropriateness of operationplans for local
channels
△ Adequacy and efficiencyoforganization
△ Financialstability and reasonable investmentplan
△ Contributiontomediaindustrygrowth
▲ Adequacyoffinancialand technicalability,
and business operations
▲ Adequacyofinformation and
communication resources
▲ Impact on marketcompetitionoffacilities-
based telecommunicationsbusinesses
▲ Protectionofusers
▲ Impact onutilizationoftelecommunication
equipment&facilities,networkR&D
efficiency, and publicinterest(such asthe
international competitivenessofthe
domestic telecom serviceindustry)
▲ Public accountability
▲ Fair competitioninthepay-TVsegment
Source: Respective government agencies, mediareports, Mirae Asset Daewoo Research
Table 9. SK Broadband and CJ HelloVision: Subscribers and financial information (‘000 people, Wbn)
SK Broadband CJ HelloVision Total Total M/S Totalmarket
Subscribers
- Media 3,489 4,102 7,591 26% 28,799
-Broadband 5,036 860 5,896 29% 20,025
-VoIP 4,450 673 5,124 41% 12,458
Revenue 2,731 1,183 3,914
OP 64 105 169
Net profit 11 60 71
Assets 3,292 2,000 5,292
Liabilities 2,170 1,049 3,220
Equity 1,121 951 2,072
Note: Basedon end-2015, Source: Mirae Asset Daewoo Research

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Figure 31. After acquisition of CJ HelloVision, SKT will have a more balanced subscriber base
Note: Basedon end-1Q16; For computation; Assumedpay-TV subscribinghouseholds consist of three people
5) Next media
In terms of telcos’ approach to the media business, they can either mimic or differentiate
themselves from conventional media firms.
Conventional firms focus on improving content competitiveness. Netflix, whose new media
platform and big data curation services gives it a technological advantage, expanded into in-
house content production in order to deliver a second phase of growth. Once a company
achieves subscriber expansion, starting an in-house content business is advantageous, as it
should take a shorter time to retrieve investments than it would with a small subscriber
base.
Telcos are able to differentiate themselves on the back of their wireless communications
technologies, including: 1) big data, which analyzes and maximizes efficiency of complicated
digital media ecosystems, 2) interactive media businesses based on 5G networks (e.g.,
virtual reality), and 3) media cloud streaming, which will be necessary to replay large
content at high quality.
These new media businesses will be based on telcos’ conventional business model (e.g.,
data traffic-based plans). Indeed, currently, 80% of LTE data is being used to play videos
(media). In other words, expansion of the media business seems necessary to boost the
growth of telecom services.
Figure 32. Telcos are revitalizing the content business
through expansion of the media value chain
Figure 33. Expecting big data analysis and service
improvement through platformenhancement
Source: SK Broadband, Mirae Asset Daewoo Research Source: SK Broadband, Mirae Asset Daewoo Research
0
10
20
30
SKTelecom
Individual mobile
SKBroadband
Pay-TVhouseholds * 3
SKTelecom
Individual mobile
SKBroadband+CJHelloVision
Pay-TVhouseholds* 3
(mnpeople) Subscriber basis
After
acquisition

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June 3, 2016
Figure 34. Telcos expected to play a significant role in VR value
chain and ecosystem
Figure 35. Telcos may use theirwireless communications
technologies to enter media cloud streaming business
Source: Nasmedia, KT, Mirae Asset Daewoo Research Source: Entrix, SKT, Mirae Asset Daewoo Research
Figure 36. Vision of new media in 5G era
Source: SKT, Mirae Asset Daewoo Research
Table 10. Content and related investments by telcos
SKT KT LG Uplus
Service
∙ SKBtv,Btvmobile
3.68mnIPTVsubscribers(+CJHelloVision:
4.15mn;pay-TVmarketshare:26%)
∙ KTOllehtv,Ollehtvmobile
∙ 6.72mnIPTVsubscribers+Skylife(pay-TVmarket
share:30%)
∙ U+tvG,LTEvideoportal
∙ 2.38mnIPTVsubscribers
(pay-TVmarketshare:8%)
Content
∙ Channel-specificcontent(CJE&M,JTBC,etc.)
∙ Movies/dramas,sports/leisure,documentary,
foreign(around80channels)
∙ Btvkidzone:Animation
∙ Jointinvestment/productionwithCJE&M
∙ Broadcasting60Disneyprograms
∙ Secured4,000DreamWorkstitles(including
VOD)
∙ BroadestfullHDchannellineup160,000VODs
∙ Children’sandeducationalcontent
∙ Mostfreemoviecontent
∙ ExclusivecontractwithSonyPictures;
SimultaneousbroadcastofUSdramas
∙ Uflixprovidesaround22,000recentmoviesand
popularHBOdramas
∙ 20,000animations,12,000kids’programs,etc.
∙ ExclusivedistributorofNBCUniversalcontentin
Korea(simultaneousbroadcast)
∙ Providing popular Japanese (in partnership with
FujiTelevision)andChinesedramas
Multi-
channel
network
(MCN)
∙ OperatingmobileMCNplatformHotzil
∙ Providingin-housecontentproducedin
partnershipwithDIATV
∙ OpenedPowerYouTuberservice
Virtual
reality(VR)
∙ Providing360-degreeVRservices
∙ Planningin-houseproductionofVRmovies
∙ Providing AR and VR integrated content and T
Realplatform
∙ Providing360-degreeVRreal-timecontentforKT
Wizbaseballteam
∙ Planning to provide 200 pieces of VR mobile
contentthisyear
∙ OperatingVRgamepromotioncenter
∙ WorkingtoprovideVRVODs
∙ PlanningtoproduceVRcontentforadults
Strategy
∙ Planning to establish a content production
fund (W320bn) for in-house content
production after acquisitionofCJ HelloVision
∙ Planning to invest W5tr in content over the
next five years
∙ Offering premium services (GIGAUHD)
targeting high-end customers
∙ Increasing OTS subscribers (bundling with
Skylife)
∙ Increasing ARPU by launching video data
plans
∙ Increasing the number of high-end customers
(UHD IPTV,etc.)
Note: Number of subscribers is as of end-March for CJ HelloVision andas of end-April for others
Source: Company data, mediareports, Mirae Asset Daewoo Research

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3. Internet of Things (IoT)
We expect to see telcos establish nationwide networks for IoT in 2H. In a bid to facilitate the
IoT industry, MSIP plans to raise the cap on frequency output of unlicensed spectrum
(900MHz) by 20x, which will help telcos reduce their network construction expenses by one-
third. The government also plans to support the establishment of nationwide IoT networks
in 1H. Specifically, the government plans to: 1) provide additional frequencies for IoT
networks, 2) exempt IoT rate plans from the approval requirement, and 3) exempt location-
based services from the approval requirement (changing to merely a reporting
requirement).
In June, SKT is scheduled to complete the world’s first nationwide network dedicated to
future IoT services, based on LPWAN technology. With this network, the company plans to
launch remote metering services and IoT-specific plans. KT commercialized a nationwide
LTE-M network in March, and plans to roll out IoT-specific plans. LG Uplus also adopted an
LTE-M network and plans to further advance its IoT@home (smart home) services, aiming to
attract more than 500,000 subscribers by the end of the year.
In the short term, IoT services should have only a minimal impact on telcos’ earnings.
However, we note that IoT gives telcos opportunities to: 1) expand into new businesses with
a relatively small investment, 2) seek quantitative subscriber growth amid the saturation of
individual telecom subscriptions, and 3) take a first-mover advantage in the industry as
network operators.
Figure 37. Government plans to improve IoT-related
regulations
Figure 38. IoT network standard status
Note: The Conference of Ministers andRegulatory Reform
Table 11. Three major telcos’ IoT businesses
SK Telecom KT LG Uplus
Smart home
IoT
services
Doorlock,dehumidifier,heater,gasvalvelockout,
Petfit,TPet,UnitedObjectsbrand
(SmartBeam2/Linkage/Band),TOutdoor,JooN(for
children),refrigerator,smartfarm,smartcashbox,
KiaMotorsUVO,T-car,smartautoscan,Health-on
GiGAhomefitness,doorlock,Yodoc(diagnostic
tool),smartfarmSafeZone,GiGAhomecam,
heater,gasvalvelockout,open/closesensor,
healthbike,golfputting,scale,healthband
HomeCCTVMomCa,homefitness,6typesof
IoT@Home(switch/gaslock/energymeter
/doorlock/hub/plug),thermostat,refrigerator,
ricecooker,kitchenfireextinguisher,LTEmagic
mirror,PetSTATION,StarWalk,IoTCabs
Platform/
brand
ThingPlug(oneM2M)/SmartHome IoTmakers/GiGAIoT IoT@Home
Technology
-LoRa(notstandardized);AlsousingLTE-M
-ForLoRa,planningtocommercializeviaseparate
networkwithnon-licensedband(920MHz)
-Lowvolume,lowpower,pricecompetitiveness
-LTE-M(3GPPRel.8)(completedstandardization)
-UtilizingexistingLTEnetwork
-Providing0.1mnmoduleforfree
-Facilitatesreal-timemanagementandmobility
-LTE-M(3GPPRel.8)(completedstandardization)-
UtilizingexistingLTEnetwork
-Facilitatesreal-timemanagementandmobility
Business
plan
-InvestW100bnforIoTtotalcare
-Buildworld’sfirstnationwideIoTnetwork
-DevelopsmarthomeserviceforHyundaiE&C
Hillstate
-Launch30servicesinayear
-Aimfor0.5mnsubscribeddevices
-Buildworld’sfirstnationwidenarrow-bandIoT
network
-Establishover30servicesin1H
-ProvidehomeIoTproducts/servicesinofficetels
with2,500households
-ApplyintelligentIoTserviceenablingautomatic
remotecontrol
Numberof
telecom
lines
-1.81mn(broadcastcontrol0.72mn,wearables
0.43mn)
-M/S39%
-1.13mn(broadcastcontrol0.38mn,tabletPC
0.30mn)
-M/S24%
-1.07mn(broadcastcontrol0.48mn,wireless
payment 0.18mn)
-M/S39%
Note: Number of telecom lines basedon MSIP andincludes vehicle control, broadcast control, wireless payment, wearables, and other; Excludedservice subscribers
counted by telcos themselves. Source: Respective companies’ data, mediareports, MSIP, Mirae Asset Daewoo Research

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Figure 39. IoT ecosystem telcos can provide: Embracing applications, platforms, networks
Source: SKT, ITU, Mirae Asset Daewoo Research
Figure 40. IoT market as viewed by telcos vs. manufacturers: Remote network connection vs.
connection between neighboring devices
Figure 41. Expecting low-power wide-area network (LPWAN) services to begin in earnest after
establishment of nationwide IoT network in 1H
Source: SK Telecom, Mirae Asset Daewoo Research

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Investment & valuation
1. Attractive dividend yields
Free cash flow at domestic telcos is improving markedly. Capex has been on the downswing
in the era of advanced telecom technology, while variable costs have also decreased due to
stable marketing competition. Given stable earnings and ample cash flow, we expect telcos
to show attractive dividend payout.
Currently, SKT boasts the most attractive dividend yield of 4.6% (2016F dividend of
W10,000/share based on the June 2nd
closing price), followed by LG Uplus (2.7%; W800) and
KT (2.6%; W290). As for KT, dividend yield could be 3.2%, if dividend reaches W1,000 on the
back of earnings growth.
The gap between SKT’s 2016F dividend yield and the three-year KTB yield has widened from
1%p in early 2014 to 3.1%p as of now. The dividend yields of LG Uplus and KT are also
higher than the three-year KTB yield.
Figure 42. Three major telcos’ DPS and dividend yield trends and forecast
Note: 2016F is basedon our estimates
Figure 43. Gap between telcos’ dividend yields and 3Y KTB yield expanding; Telcos becoming
increasingly attractive as dividend plays
Source: Mirae Asset Daewoo Research
0
1
2
3
4
5
0
2,000
4,000
6,000
8,000
10,000
12,000
14 15 16F 14 15 16F 14 15 16F
SKTelecom KT LGUplus
(%)(W)
DPS(L)
Dividendyield(R)
3.9
4.6
2.9
1.5
1.0
3.1
0
1
2
3
4
5
6
7
1/14 7/14 1/15 7/15 1/16
(%, %p)
SKTdividendyield
KTdividendyield
LGUplusdividendyield
3YKTByield
GapbetweenSKTdividendyieldand3YKTByield

Telecom Service
23
June 3, 2016
2. Investment strategy
We remain Overweight on telecom services. Despite stagnant market growth, telcos are
expected to report robust earnings thanks to lower capex and marketing spend. In addition,
telcos’ expansion of non-telecom businesses is anticipated to enhance their growth
potential. Based on improved cash flow, they are also forecast to strengthen shareholder
returns.
In our view, telcos’ high dividend payout ratios will likely provide downside support to
shares when regulatory risks weigh on shares. The 20th
National Assembly is expected to
increase the pressure on telcos to reduce plan prices. In the past, telco shares experienced
corrections whenever such issues emerged. However, investing during corrections could
deliver high returns and dividend yields in line with the recovery of share prices.
While stagnating ARPU and rising price-cut pressures should be negative to telcos, their
efforts to 1) enhance data service quality by investing in new frequency bands and 2) boost
earnings by offering various paid services are noteworthy. In addition, service plan prices
are expected to rise steadily in line with growth in data consumption. Indeed, monthly per
capita LTE data consumption is nearing 5GB in Korea. Meanwhile, the National Assembly’s
proposal to abolish base fees should not have a significant impact on telcos, as today’s
major tariff schemes (such as data plans) do not charge base fees. We also note that
households’ telecom spending as a percentage of total expenditures has been on the
downtrend over the past 10 years. Telcos are also aggressively pursuing new growth
drivers, including media and IoT.
We recommend KT in the short term in light of high earnings visibility and dividend growth.
And from a longer-term perspective (through the end of the year), we recommend SKT
given its high dividend payout and aggressive business expansion.
Figure 44. Telco shares tend to experience corrections whenever telecom expenses emerges as
an issue; Investing during corrections could deliver high returns and dividend yields
Note: Computedtelecom expenses issue index basedon amount of search of telecom expenses on NAVER
Source: Thomson Reuters, NAVER, Mirae Asset Daewoo Research
Figure 45. Note stocks with low valuation and high dividend yields: We particularly highlight SKT
Note: Domestic companies andforeign companies are basedon our estimates andmarket consensus, respectively
Source: Bloomberg, Mirae Asset Daewoo Research
0
20
40
60
80
10034
37
40
43
46
49
1/15 4/15 7/15 10/15 1/16 4/16
(max=100)(p)
Telecomservicestockpriceindex(L)
Telecomexpenses issueindex (R, reverse)
SKT
KT
LGUplus
Verizon
AT&T
SingTelNTTDocomo
Softbank
ChinaMobile
0
2
4
6
8
0 1 2 3 4 5 6
P/B(x)
Dividendyield(%)

Telecom Service
24
June 3, 2016
3. Valuation comparison
Domestic telcos are mostly undervalued compared to global peers due to 1) high regulatory
risks, 2) low ROEs, and 3) inconsistent dividend policy.
Although regulatory risks and ROE are unlikely to improve in the short term, discount
factors related to dividends have largely dissipated, in our view. KT and LG Uplus are
expected to increase dividend payments from last year’s levels, and SKT guided its dividend
yield at 4.6% (W10,000 per share).
Table 12. Major global telcos’ earnings forecast (Wbn)
Companyname
Market
cap.
Revenue OP Net profit
15 16F 17F 15 16F 17F 15 16F 17F
SKT 17,441 17,137 17,429 17,644 1,708 1,750 1,787 1,519 1,586 1,400
KT 8,121 22,281 22,560 22,574 1,293 1,415 1,440 553 581 646
LG Uplus 4,737 10,795 11,078 11,183 632 685 707 351 420 446
NTTDocomo 116,941 43,669 50,114 51,797 7,553 9,740 10,437 5,290 6,810 7,337
Softbank 79,095 88,298 98,819 101,473 9,641 12,034 13,793 4,574 6,124 7,652
ChinaMobile 279,361 120,392 126,586 132,405 19,909 20,955 23,024 19,552 19,735 21,553
SingaporeTelecom 53,421 14,151 14,801 15,211 2,347 2,549 2,663 3,230 3,478 3,735
PCCW 5,954 5,742 6,132 6,365 871 941 1,017 335 357 396
AT&T 283,162 166,215 195,369 199,322 28,063 35,304 37,445 15,110 20,748 21,906
Verizon 244,142 149,026 152,043 152,373 37,432 35,211 36,227 20,243 19,135 19,542
Deutsche Telekom 96,767 86,989 94,435 96,982 8,831 11,782 13,159 4,089 5,558 6,191
BT Group 73,628 33,186 41,329 41,704 6,509 7,580 8,002 4,510 5,131 5,528
Orange 54,707 50,559 54,370 54,849 6,006 7,225 7,913 3,332 3,565 3,718
Note: Domestic companies andforeign companies are basedon our estimates andmarket consensus respectively
Source: Bloomberg, Mirae Asset Daewoo Research estimates
Table 13. Major global telcos’ valuation (x,%)
Companyname
P/E P/B EV/EBITDA ROE Dividend yield
15 16F 17F 15 16F 17F 15 16F 17F 15 16F 15 16F
SK Telecom 11.5 11.0 12.5 1.0 1.0 0.9 5.0 4.6 4.4 10.2 10.2 4.6 4.6
KT 13.3 14.0 12.6 0.6 0.7 0.6 3.0 2.6 2.8 5.2 5.2 1.8 2.6
LG Uplus 12.9 11.3 10.6 1.0 1.0 0.9 3.9 3.8 3.7 8.1 9.1 2.4 2.7
NTTDocomo 19.2 16.0 14.7 1.9 1.8 1.7 6.7 7.4 7.0 10.3 11.8 - 3.0
Softbank 14.8 12.1 9.6 2.7 2.2 1.8 6.8 6.9 6.5 17.4 19.6 - 0.7
ChinaMobile 14.2 14.0 12.8 1.7 1.6 1.5 4.4 4.5 4.2 12.0 11.5 3.0 3.0
SingaporeTelecom 16.0 15.4 14.3 2.5 2.3 2.2 14.2 13.9 13.4 15.6 15.5 - 4.5
PCCW 16.7 15.2 13.7 3.5 3.3 3.2 6.0 6.0 5.7 21.7 22.0 4.9 4.9
AT&T 16.6 13.6 12.9 1.9 1.9 1.8 7.2 6.6 6.4 13.2 14.4 4.9 5.0
Verizon 12.5 12.8 12.5 11.0 8.1 6.2 6.6 6.8 6.7 128.4 80.2 4.5 4.5
Deutsche Telekom 12.8 17.9 16.0 2.5 2.3 2.2 6.0 6.1 5.9 19.5 13.1 - 3.5
BT Group 14.5 14.3 13.3 4.2 4.7 4.2 8.6 6.8 6.6 46.3 26.0 - 3.2
Orange 18.7 16.2 14.6 1.3 1.3 1.3 6.4 5.6 5.6 8.8 8.8 - 3.9
Average 14.9 14.1 13.1 2.1 2.0 1.9 5.9 5.6 5.5 12.9 12.8 3.7 3.5
Note: Domestic companies andforeign companies are basedon our estimates andmarket consensus, respectively; Excluded
outliers when computingaverage
Source: Bloomberg, Mirae Asset Daewoo Research estimates

Telecom Service
25
June 3, 2016
Downside support: Stabilizing earnings and dividend expectations
Earnings stability is improving. This year, KT’s operating profit and net profit are
forecast to jump 9.5% and 6.3%, respectively. The firm has consistently reported
quarterly operating profit of over W300bn since last year, and non-consolidated
free cash flow turned positive last year.
Dividend expectations are also growing. Last year, KT’s DPS was W500 and dividend
yield was less than 2%. This year, DPS is likely to climb to W800, and dividend yield
to 2.5%. If DPS rises to W1,000 aided by earnings growth, dividend yield should rise
above 3%.
Supplementary growth drivers: Solid non-telecom business revenue;
Growth of real estate operations
Among major telcos, KT boasts the highest revenue mix of non-telecom businesses.
The company is seeking to boost its asset value through real estate operations.
Non-telecom business: This year, KT is anticipated to generate 37% of revenue
from other services, including finance (BC Card) and media/content (IPTV, KT
Skylife, Nasmedia, and KT Music). BC Card earnings are improving, along with a
steady increase in payment volume. China UnionPay has diversified its revenue
sources after extending its reach globally in partnership with BC Card. In the
media/content space, KT is seeing an increase in advertising and VOD revenues on
the back of its dominant position in the pay-TV market. The firm’s media/content
revenue is forecast to jump 10.5% this year.
Real estate business: KT’s real estate holdings are estimated at W7.8tr in value.
Around 30% of its properties are located in the Seoul metropolitan area (70% in
terms of value), and those classified as profit maximization assets will be
developed/sold/leased for profit maximization. The firm’s real estate revenue came
in at W250bn last year. (In 2013, real estate revenue hit W400bn, but the revenue
was offset by consolidated net losses.) The firm plans to expand the corporate
housing rental business starting this year, and commence the development/pre-
sale business in 2018. We think the real estate business will help boost the firm’s
overall earnings.
Raise TP to W40,000; Our short-term top pick in the telecom sector
We reiterate our Buy call on KT and raise our target price by 8% to W40,000 (from
W37,000). We believe improved earnings visibility and dividend expectations will
serve as positive share catalysts. In deriving our target price, we averaged: 1) our
2016F BPS multiplied by a P/B of 0.7x (the upper end of the recent three-year P/E
band), and 2) a 2016F DPS multiplied by the three-year KTB yield.
KT (030200 KS)
Stable earnings and higher dividends
FY (Dec.) 12/13 12/14 12/15 12/16F 12/17F 12/18F
Revenue (Wbn) 23,811 22,312 22,281 22,560 22,574 22,677
OP (Wbn) 839 -407 1,293 1,415 1,440 1,401
OP margin(%) 3.5 -1.8 5.8 6.3 6.4 6.2
NP (Wbn) -162 -1,055 553 581 646 646
EPS (W) -622 -4,040 2,118 2,224 2,473 2,473
ROE(%) -1.4 -9.5 5.2 5.2 5.6 5.4
P/E(x) - - 13.3 14.0 12.6 12.6
P/B(x) 0.6 0.7 0.6 0.7 0.6 0.6
Note: Allfigures are basedon consolidated K-IFRS; NP refers to net profit attributable to controllinginterests
Source: Company data, Mirae Asset Daewoo Research estimates
Telecom Service
(Maintain) Buy
TargetPrice (12M,W) 40,000
Share Price (06/02/16,W) 31,100
Expected Return 29%
OP (16F,Wbn) 1,415
ConsensusOP (16F,Wbn) 1,381
EPS Growth (16F,%) 5.0
Market EPS Growth (16F,%) 16.6
P/E(16F, x) 14.0
Market P/E(16F, x) 10.6
KOSPI 1,985.11
MarketCap (Wbn) 8,121
Shares Outstanding (mn) 261
Free Float(%) 85.9
ForeignOwnership (%) 49.0
Beta (12M) 0.24
52-WeekLow 26,350
52-Week High 32,550
(%) 1M 6M 12M
Absolute 1.0 4.7 5.6
Relative 0.6 6.0 10.6
70
80
90
100
110
120
6.15 10.15 2.16 6.16
KT KOSPI

Telecom Service
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June 3, 2016
KDB Daewoo Securities Research
Table 14. KT earnings trend and forecast (Wbn, %, ‘000 people)
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16F 3Q16F 4Q16F 2014 2015 2016F
Revenue 5,399 5,431 5,492 5,959 5,515 5,550 5,530 5,964 22,312 22,281 22,560
Servicerevenue 4,713 4,827 4,896 5,078 4,899 4,951 4,940 5,140 19,240 19,514 19,931
Wireless 1,822 1,829 1,844 1,875 1,851 1,858 1,859 1,857 7,316 7,371 7,426
Fixed-line 1,305 1,303 1,284 1,267 1,279 1,276 1,259 1,284 5,540 5,159 5,098
Media/content 384 409 429 441 442 456 469 470 1,508 1,662 1,837
Finance 791 801 836 983 823 841 848 991 3,222 3,411 3,503
Other 411 484 503 513 505 520 504 538 1,476 1,911 2,067
Productrevenue 685 605 596 881 616 599 590 824 3,250 2,767 2,629
Operatingprofit 314 369 343 267 385 365 362 303 -407 1,293 1,415
OPmargin 5.8 6.8 6.3 4.5 7.0 6.6 6.6 5.1 -1.8 5.8 6.3
Netprofit 281 322 126 -97 215 198 186 72 -966 631 671
Netmargin 5.2 5.9 2.3 -1.6 3.9 3.6 3.4 1.2 -4.3 2.8 3.0
YoYYoYYoYYoY
Revenue -3.5 -3.6 -2.9 9.9 2.2 2.2 0.7 0.1 -6.3 -0.1 1.3
Servicerevenue 0.4 0.2 -0.9 6.0 3.9 2.6 0.9 1.2 -3.0 1.4 2.1
Wireless 2.2 1.7 -3.6 3.0 1.6 1.6 0.8 -0.9 4.9 0.7 0.7
Fixed-line -8.1 -7.5 -6.4 -5.4 -2.0 -2.1 -2.0 1.4 -7.1 -6.9 -1.2
Media/content 3.8 7.3 8.2 21.9 15.3 11.5 9.4 6.6 11.4 10.2 10.5
Finance 2.6 1.8 2.0 16.4 4.0 5.0 1.5 0.8 -16.5 5.9 2.7
Other 34.2 20.8 28.3 36.0 22.9 7.4 0.2 4.9 -12.5 29.5 8.2
Productrevenue -27.6 -29.4 -22.1 29.2 -10.2 -1.0 -1.0 -6.4 -18.1 -14.9 -5.0
Operatingprofit 155.0 TTB 18.0 1568.8 22.8 -1.1 5.6 13.4 TTR TTB 9.5
Netprofit TTB TTB 70.3 RR -23.4 -38.5 47.9 TTB RR TTB 6.3
Key indicatorsKey indicatorsKey indicatorsKey indicators
Wirelesssubscribers 18,178 18,368 18,515 18,723 18,845 18,968 19,030 19,092 18,053 18,723 19,092
LTEsubscribers 11,364 11,883 12,335 12,832 13,209 13,807 14,106 14,405 10,780 12,832 14,405
Fixed-linesubscribers 31,313 31,397 31,496 31,561 31,604 31,667 31,747 31,826 31,248 31,561 31,826
Mediasubscribers 7,984 8,205 8,442 8,645 8,822 9,059 9,178 9,297 7,781 8,645 9,297
Notes: Allfigures are basedon consolidatedK-IFRS; Net profit is attributable to controllinginterests andnon-controllinginterests; TTR, TTB, andRR refer to “turningto red,”
“turningto black,” and“remainingin red,” respectively; Differences exist from FSS data due to retroactive changes to KT Rental/KT Capitaldata(reclassifiedas discontinued
operations since 2014 due to sale in 2Q15); Revisednumber of wireless subscribers in line with MSIP disclosure standards; WiBro subscribers included
Figure 46. Downside support to shares expected in light of
dividend growth; 2016F consensus also indicates uptrend
Figure 47. Supplementing growth: Steadiest revenue from
non-telecom business
0
10
20
30
40
0
2
4
6
8
2012 2013 2014 2015 2016F
(%)(Wtr) Non-telecomservicerevenue(L)
Non-telecomservicerevenue/total servicerevenue(R)
0
1
2
3
0
200
400
600
800
1,000
2014 2015 2016F
(%)(W)
DPS(L)
Dividendyield(R)

Telecom Service
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June 3, 2016
KT (030200 KS/Buy/TP: W40,000)
Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized)
(Wbn) 12/15 12/16F 12/17F 12/18F (Wbn) 12/15 12/16F 12/17F 12/18F
Revenue 22,281 22,560 22,574 22,677 Current Assets 8,583 9,959 10,092 11,317
Cost of Sales 0 0 0 0 Cashand CashEquivalents 2,559 3,930 3,716 4,531
Gross Profit 22,281 22,560 22,574 22,677 AR &OtherReceivables 3,007 3,009 3,011 3,025
SG&AExpenses 20,988 21,145 21,134 21,276 Inventories 525 526 526 529
Operating Profit(Adj) 1,293 1,415 1,440 1,401 OtherCurrentAssets 2,492 2,494 2,839 3,232
Operating Profit 1,293 1,415 1,440 1,401 Non-CurrentAssets 20,742 19,647 18,960 18,269
Non-Operating Profit -574 -430 -387 -348 Investmentsin Associates 270 270 270 272
Net FinancialIncome -316 -205 -171 -145 Property, Plant and Equipment 14,479 13,545 13,142 12,672
Net GainfromInvin Associates 6 0 0 0 IntangibleAssets 2,600 2,438 2,152 1,927
Pretax Profit 719 985 1,053 1,053 TotalAssets 29,341 29,622 29,068 29,602
IncomeTax 229 314 336 336 Current Liabilities 8,640 8,176 7,099 7,131
Profit fromContinuing Operations 490 671 717 717 AP &OtherPayables 1,290 1,292 1,292 1,298
Profit fromDiscontinued Operations 141 0 0 0 Short-TermFinancialLiabilities 1,831 1,361 280 0
Net Profit 631 671 717 717 OtherCurrentLiabilities 5,519 5,523 5,527 5,833
Controlling Interests 553 581 646 646 Non-CurrentLiabilities 8,536 8,732 8,732 8,738
Non-Controlling Interests 78 91 72 72 Long-TermFinancialLiabilities 7,108 7,508 7,508 0
TotalComprehensiveProfit 562 671 717 717 OtherNon-Current Liabilities 1,428 1,224 1,224 8,738
Controlling Interests 501 580 626 626 Total Liabilities 17,176 16,908 15,832 15,869
Non-Controlling Interests 61 91 91 91 Controlling Interests 10,845 11,303 11,753 12,179
EBITDA 4,933 5,407 4,828 4,796 Capital Stock 1,564 1,564 1,564 1,564
FCF (FreeCashFlow) 1,114 1,964 1,279 1,254 Capital Surplus 1,443 1,443 1,443 1,443
EBITDA Margin (%) 22.1 24.0 21.4 21.1 Retained Earnings 9,059 9,518 9,967 10,392
Operating ProfitMargin(%) 5.8 6.3 6.4 6.2 Non-Controlling Interests 1,320 1,411 1,483 1,554
Net Profit Margin (%) 2.5 2.6 2.9 2.8 Stockholders'Equity 12,165 12,714 13,236 13,733
Cash Flows (Summarized) Forecasts/Valuations (Summarized)
(Wbn) 12/15 12/16F 12/17F 12/18F 12/15 12/16F 12/17F 12/18F
CashFlowsfromOp Activities 4,230 4,460 3,779 3,754 P/E(x) 13.3 14.0 12.6 12.6
Net Profit 631 671 717 717 P/CF(x) 1.4 1.6 1.8 1.8
Non-CashIncomeand Expense 4,583 4,511 3,895 3,876 P/B(x) 0.6 0.7 0.6 0.6
Depreciation 3,031 3,430 2,903 2,970 EV/EBITDA (x) 3.0 2.6 2.8 2.6
Amortization 609 562 485 425 EPS (W) 2,118 2,224 2,473 2,473
Others 943 519 507 481 CFPS (W) 19,968 19,846 17,663 17,590
Chg inWorking Capital -635 -203 -326 -358 BPS (W) 44,851 46,606 48,329 49,957
Chg inAR&Other Receivables 113 -3 -2 -14 DPS (W) 500 800 900 900
Chg inInventories -179 0 0 -2 Payoutratio(%) 19.4 29.2 30.7 30.7
Chg inAP&OtherPayables 81 1 1 6 Dividend Yield (%) 1.8 2.6 2.9 2.9
IncomeTax Paid -77 -314 -336 -336 Revenue Growth(%) -0.1 1.3 0.1 0.5
CashFlowsfromInvActivities -2,402 -2,897 -2,715 -2,719 EBITDA Growth(%) 43.1 9.6 -10.7 -0.7
Chg inPP&E -3,087 -2,496 -2,500 -2,500 Operating ProfitGrowth (%) - 9.4 1.8 -2.7
Chg inIntangible Assets -374 -400 -200 -200 EPS Growth (%) - 5.0 11.2 0.0
Chg inFinancialAssets 339 -1 -15 -19 Accounts Receivable Turnover (x) 7.3 7.5 7.5 7.5
Others 720 0 0 0 InventoryTurnover (x) 48.5 42.9 42.9 43.0
CashFlowsfromFinActivities -1,164 -192 -1,277 -220 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0
Chg inFinancialLiabilities -4,146 -70 -1,081 0 ROA (%) 2.0 2.3 2.4 2.4
Chg inEquity 3 0 0 0 ROE(%) 5.2 5.2 5.6 5.4
Dividends Paid -42 -122 -196 -220 ROIC (%) 4.8 5.9 6.3 6.3
Others 3,021 0 0 0 Liability toEquityRatio(%) 141.2 133.0 119.6 115.6
Increase (Decrease) inCash 671 1,370 -214 814 Current Ratio (%) 99.3 121.8 142.2 158.7
Beginning Balance 1,889 2,559 3,930 3,716 Net Debt to EquityRatio(%) 50.0 36.5 28.4 21.3
Ending Balance 2,559 3,930 3,716 4,531 InterestCoverageRatio (x) 3.4 4.8 5.2 5.4

Telecom Service
28
June 3, 2016
Downside support: High dividend yield (4% level); Interim dividend
likely
SK Telecom’s (SKT) high dividend yield looks attractive not just among the three big
telcos, but also among KOSPI 200 stocks. Factoring in a dividend per share of
W10,000, 2016F dividend yield is estimated at 4.6%. We forecast interim and year-
end dividends to be W1,000 and W9,000, respectively. Although the possibility of
restrictions on telecom rates and the government’s prolonged deliberation on the
CJ HelloVision acquisition are weighing on SKT’s shares, we expect the company’s
high dividend yield to provide downside support.
Supplementary growth drivers: Expansion into non-telecom
business; Acquisition of media; Investment in commerce
SKT’s parent-based telecom revenue has experienced negative YoY growth since
4Q14. In October 2014, consumers were allowed to opt for discounted plan rates
instead of subsidies when purchasing a handset. In April 2015, discount was raised
from 12% to 20%. With the LTE market nearing saturation (LTE subscribers already
exceed 70% of overall subscribers), SKT is making aggressive efforts to expand into
non-telecom business areas.
Acquisition of media: SKT announced its plan to acquire CJ HelloVision in
November 2015. The deal is under review by the Fair Trade Commission, the Korea
Communications Commission, and the Ministry of Science, ICT, and Future
Planning. In 2015, CJ HelloVision posted revenue of W1.1tr, operating profit of
W105bn, and net profit of W60bn. And the company holds approximately 4.1mn
subscribers as of April 2016. Once CJ HelloVision is merged with SK Broadband, the
combined number of subscribers will be 7.73mn, making the merged firm the
second-largest pay-TV operator. Also, the pay-TV subscriber base should help the
company to expand into wired- and wireless integrated services and IoT services.
Investment in commerce: In 1Q16, SK Planet was split off into three entities,
including a commerce business (11th Street). SKT’s investment is concentrated on
the commerce unit. In an effort to sharpen competitiveness of mobile shopping,
the commerce unit plans to use internal cash reserves (roughly W500bn) and
outside investment (W1tr) to enhance logistics systems and marketing activities. In
addition, in April the unit launched services to directly purchase and deliver
products, while reinforcing efforts to reach SKT mobile subscribers (e.g., 11%
discount for T membership subscribers). While mobile shopping competition is
fierce, we note the business’s strong growth relative to telecom services.
Furthermore, the value of the commerce unit could gain attention by itself. Retain
SK Telecom (017670 KS)
Dividends and new business potential to outstrip
negatives
FY (Dec.) 12/13 12/14 12/15 12/16F 12/17F 12/18F
Revenue (Wbn) 16,602 17,164 17,137 17,429 17,644 17,860
OP (Wbn) 2,011 1,825 1,708 1,750 1,787 1,842
OP margin(%) 12.1 10.6 10.0 10.0 10.1 10.3
NP (Wbn) 1,639 1,801 1,519 1,586 1,400 1,454
EPS (W) 20,298 22,307 18,807 19,645 17,336 18,011
ROE(%) 13.0 12.9 10.2 10.2 8.6 8.6
P/E(x) 11.3 12.0 11.5 11.0 12.5 12.0
P/B(x) 1.2 1.3 1.0 1.0 0.9 0.9
Telecom Service
(Maintain) Buy
Share Price (06/02/16,W) 216,000
Expected Return 30%
OP (16F,Wbn) 1,750
ConsensusOP (16F,Wbn) 1,689
P/E(16F, x) 11.0
KOSPI 1,985.11
Free Float(%) 62.2
Beta (12M) 0.03
52-WeekLow 193,000
52-Week High 263,000
(%) 1M 6M 12M
Absolute 2.9 -7.5 -13.1
Relative 2.5 -6.4 -9.0
60
70
80
90
100
110
6.15 10.15 2.16 6.16
SK Telecom KOSPI

Telecom Service
29
June 3, 2016
Buy with TP of W280,000; Our longer-term top pick
We maintain our Buy call with a target price of W280,000. In the short term, SKT
shares could be dragged down by uncertainties regarding regulatory risks and
expenses related to non-telecom businesses. However, if uncertainties ease this
year, we believe the stock will bounce back, aided by its deep correction relative to
telecom peers, 10-year-low foreign ownership level, and high dividend yield.
Table 15. SKT earnings trends and forecast (Wbn,%, ‘000 people)
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16F 3Q16F 4Q16F 2014 2015 2016F
Revenue 4,240 4,256 4,261 4,379 4,229 4,329 4,369 4,503 17,164 17,137 17,429
Parent 3,133 3,144 3,142 3,138 3,098 3,179 3,182 3,176 13,013 12,557 12,635
Wireless 2,910 2,917 2,923 2,913 2,895 2,904 2,905 2,900 12,053 11,662 11,604
Other 224 227 219 225 203 274 277 277 960 895 1,031
Subsidiaries 1,107 1,112 1,119 1,241 1,131 1,151 1,187 1,326 4,151 4,580 4,794
Operating profit 403 413 491 402 402 438 474 436 1,825 1,708 1,750
OP margin(%) 9.5 9.7 11.5 9.2 9.5 10.1 10.8 9.7 10.6 10.0 10.0
Net profit 443 398 382 293 572 334 374 308 1,799 1,516 1,588
Net margin(%) 10.4 9.3 9.0 6.7 13.5 7.7 8.6 6.8 10.5 8.8 9.1
QoQ
Revenue -1.1 0.4 0.1 2.8 -3.4 2.4 0.9 3.1
Parent -1.5 0.4 -0.1 -0.1 -1.3 2.6 0.1 -0.2
Wireless -0.5 0.2 0.2 -0.3 -0.6 0.3 0.0 -0.2
Other -12.2 1.3 -3.5 2.7 -9.8 35.1 1.0 -0.1
Subsidiaries -0.2 0.4 0.7 10.9 -8.9 1.8 3.1 11.8
Operating profit -17.8 2.5 18.9 -18.1 0.1 9.0 8.1 -8.0
Net profit -12.0 -10.1 -4.0 -23.2 95.1 -41.7 11.9 -17.6
YoY
Revenue 0.9 -1.1 -2.4 2.1 -0.3 1.7 2.5 2.8 3.4 -0.2 1.7
Parent -4.0 -3.7 -4.9 -1.4 -1.1 1.1 1.3 1.2 1.2 -3.5 0.6
Wireless -4.2 -3.9 -4.3 -0.4 -0.5 -0.4 -0.6 -0.5 0.4 -3.2 -0.5
Other -1.3 -0.9 -12.0 -11.8 -9.4 20.8 26.5 23.0 12.7 -6.8 15.2
Subsidiaries 18.0 6.9 5.3 11.9 2.1 3.5 6.0 6.8 10.9 10.3 4.7
Operating profit 59.8 -24.4 -8.6 -18.0 -0.1 6.2 -3.5 8.5 -9.2 -6.4 2.5
Net profit 65.7 -20.0 -28.1 -41.7 29.2 -16.1 -2.1 5.0 11.8 -15.8 4.7
Key indicators
LTE subscribers 17,447 17,937 18,465 18,980 19,526 20,432 20,884 21,337 16,737 18,980 21,337
Notes: Allfigures are basedon consolidatedK-IFRS; Incurredone-off cost of W110bn relatedto early retirement plan in 2Q15; Reflected gain of W314.7bn from sell-off of
stake in LOENEntertainment
Source: Company data, Mirae Asset Daewoo Research
high dividends (even relative to global peers)
Figure 49. Supplementing growth: Media (CJ HelloVision) and
commerce (11th Street) businesses are strengthening
2
3
4
5
8,000
8,500
9,000
9,500
10,000
10,500
2014 2015 2016F
(%)(W)
DPS(L)
Dividendyield(R)

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June 3, 2016
SK Telecom (017670 KS/Buy/TP: W280,000)
(Wbn) 12/15 12/16F 12/17F 12/18F (Wbn) 12/15 12/16F 12/17F 12/18F
Cost of Sales 0 0 0 0 Cashand CashEquivalents 769 1,709 1,952 2,394
Operating Profit(Adj) 1,708 1,750 1,787 1,842 OtherCurrentAssets 1,098 1,568 1,587 1,607
Operating Profit 1,708 1,750 1,787 1,842 Non-CurrentAssets 23,421 22,889 22,538 22,854
Non-Operating Profit 327 383 94 112 Investmentsin Associates 6,896 7,108 7,195 7,283
Net GainfromInvin Associates 786 671 300 400 IntangibleAssets 4,213 4,095 4,245 4,395
Pretax Profit 2,035 2,133 1,881 1,954 TotalAssets 28,581 29,560 29,501 30,321
Profit fromContinuing Operations 1,516 1,588 1,401 1,456 AP &OtherPayables 1,603 1,652 1,673 1,693
Profit fromDiscontinued Operations 0 0 0 0 Short-TermFinancialLiabilities 1,083 1,083 260 0
Net Profit 1,516 1,588 1,401 1,456 OtherCurrentLiabilities 2,570 2,649 2,681 2,974
Controlling Interests 1,519 1,586 1,400 1,454 Non-CurrentLiabilities 7,951 8,111 8,127 8,144
Non-Controlling Interests -3 2 1 1 Long-TermFinancialLiabilities 6,650 6,770 6,770 0
TotalComprehensiveProfit 1,518 1,398 1,401 1,456 OtherNon-Current Liabilities 1,301 1,341 1,357 8,144
Controlling Interests 1,522 1,441 1,406 1,461 Total Liabilities 13,207 13,495 12,741 12,811
Non-Controlling Interests -5 -43 -5 -5 Controlling Interests 15,251 15,940 16,634 17,382
EBITDA 4,701 4,823 4,895 4,982 Capital Stock 45 45 45 45
FCF (FreeCashFlow) 1,299 1,760 1,774 1,048 Capital Surplus 2,916 3,314 3,314 3,314
Operating ProfitMargin(%) 10.0 10.0 10.1 10.3 Non-Controlling Interests 123 125 126 127
(Wbn) 12/15 12/16F 12/17F 12/18F 12/15 12/16F 12/17F 12/18F
Net Profit 1,516 1,588 1,401 1,456 P/CF(x) 3.7 3.6 3.6 3.6
Amortization 0 0 0 0 EPS (W) 18,807 19,645 17,336 18,011
Others 257 127 402 297 CFPS (W) 59,025 59,298 60,822 60,599
Chg inWorking Capital -686 59 35 25 BPS (W) 216,875 225,407 233,998 243,265
Chg inAR&Other Receivables -4 -72 -30 -30 DPS (W) 10,000 10,000 10,000 10,000
Chg inInventories -8 -8 -3 -3 Payoutratio(%) 46.7 44.5 50.4 48.5
Chg inAP&OtherPayables -95 9 4 4 Dividend Yield (%) 4.6 4.6 4.6 4.6
CashFlowsfromInvActivities -2,880 -2,791 -2,684 -3,385 EBITDA Growth(%) -0.3 2.6 1.5 1.8
Chg inPP&E -2,442 -2,320 -2,500 -3,200 Operating ProfitGrowth (%) -6.4 2.5 2.1 3.1
Chg inIntangible Assets -124 118 -150 -150 EPS Growth (%) -15.7 4.5 -11.8 3.9
Chg inFinancialAssets -534 -505 -34 -35 Accounts Receivable Turnover (x) 7.2 7.3 7.3 7.3
Others 220 -84 0 0 InventoryTurnover (x) 63.3 62.8 62.2 62.2
CashFlowsfromFinActivities -965 -618 -1,559 -734 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0
Chg inFinancialLiabilities 653 120 -823 0 ROA (%) 5.4 5.5 4.7 4.9
Chg inEquity 0 398 0 0 ROE(%) 10.2 10.2 8.6 8.6
Others -950 -430 -30 -28 Liability toEquityRatio(%) 85.9 84.0 76.0 73.2
Increase (Decrease) inCash -66 941 243 442 Current Ratio (%) 98.2 123.9 150.9 160.0
Beginning Balance 834 769 1,709 1,952 Net Debt to EquityRatio(%) 39.9 30.2 22.5 18.9
Ending Balance 769 1,709 1,952 2,394 InterestCoverageRatio (x) 5.7 5.8 6.2 6.8

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June 3, 2016
Downside support: To maintain dividend payout ratio at 30% or over
LG Uplus maintains a dividend payout ratio of 30%. Accordingly, earnings
improvement could further push up dividend expectations. We project the
company’s dividend payments to increase to W290 per share this year, up W40 YoY,
on the back of operating and net profit growth of 8.3% and 19.5%, respectively.
Supplementary growth drivers: Focus on new CEO’s strategy
Compared to peers, LG Uplus’ revenue structure is more focused on traditional
telecom services. However, the telco’s new CEO is now seeking new growth drivers
to accelerate growth.
Telecom services: LG Uplus introduced LTE services ahead of its peers in end-2011,
and since then its mobile subscribers have increased to 11mn from 9mn. The
company is the only telco to have recorded a net MoM increase in the number
portability subscribers for 12 straight months. The larger mix of direct subscribers
relative to MVNO subscribers should also be positive for its ARPU. The robust
growth of the telecom services business is providing a boost to the fixed-line
internet and IPTV businesses. Indeed, the share of LG Uplus’ IPTV service tv G in the
pay-TV market has risen to 8% from 4% in 2011.
IoT: The new CEO’s strategy should influence the direction of the company’s IoT
businesses. Currently, its IoT businesses largely focus on smart home services
(IoT@home). Going forward, the company plans to develop intelligence-based
services, which will use big data to allow home devices to be operated without
human control. The company aims to raise the number of smart home service
subscribers by 500,000 this year.
The telco is also anticipated to expand the customer base of its IoT businesses to
enterprises. Recently, in an effort to promote the IoT market, the government
began to ease regulations and support the establishment of dedicated networks. In
the early stages of market formation, the important roles tend to be played by
leading firms with a business model, capital, and marketing capabilities, along with
the government. LG Uplus has created an IoT business model ahead of competitors
in the B2C space, becoming the first in Korea to introduce an IoT rate scheme.
Accordingly, the company is also expected to take the lead in the B2B market.
Maintain Buy and TP of W14,000
We maintain our Buy call on LG Uplus and our target price of W14,000. Our
investment recommendation is premised on: 1) relatively robust growth amid the
slowdown of the broader market, 2) expectations for a first-mover advantage in the
IoT market, and 3) healthy dividend yield (around the mid-2% level).
LG Uplus (032640 KS)
Heading into the second phase of growth
FY (Dec.) 12/13 12/14 12/15 12/16F 12/17F 12/18F
Revenue (Wbn) 11,450 11,000 10,795 11,078 11,183 11,308
OP (Wbn) 542 576 632 685 707 714
OP margin(%) 4.7 5.2 5.9 6.2 6.3 6.3
NP (Wbn) 279 228 351 420 446 462
EPS (W) 640 523 805 962 1,022 1,057
ROE(%) 7.2 5.6 8.1 9.1 9.1 8.8
P/E(x) 16.8 22.0 12.9 11.3 10.6 10.3
P/B(x) 1.2 1.2 1.0 1.0 0.9 0.9
Telecom Service
(Maintain) Buy
Share Price (06/02/16,W) 10,850
Expected Return 29%
OP (16F,Wbn) 685
ConsensusOP (16F,Wbn) 691
P/E(16F, x) 11.3
KOSPI 1,985.11
Free Float(%) 63.9
Beta (12M) 0.11
52-WeekLow 8,920
52-Week High 12,900
(%) 1M 6M 12M
Absolute -3.6 3.8 18.1
Relative -3.9 5.1 23.6
70
90
110
130
150
6.15 10.15 2.16 6.16
LG Uplus KOSPI

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June 3, 2016
Table 16. LG Uplus earnings trends and forecast (Wbn,%, ‘000 people)
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16F 3Q16F 4Q16F 2014 2015 2016F
Revenue 2,556 2,662 2,717 2,861 2,713 2,747 2,783 2,835 11,000 10,795 11,078
Service revenue 2,113 2,160 2,162 2,219 2,175 2,220 2,234 2,264 8,398 8,654 8,894
Wireless 1,304 1,336 1,333 1,325 1,321 1,345 1,353 1,356 5,212 5,298 5,375
Fixed-line 800 817 822 865 846 871 877 909 3,157 3,303 3,503
Handsetrevenue 443 502 554 642 538 527 549 571 2,602 2,141 2,184
% ofrevenue
Service revenue 82.7 81.2 79.6 77.6 80.2 80.8 80.3 79.9 76.3 80.2 80.3
Handsetrevenue 17.3 18.8 20.4 22.4 19.8 19.2 19.7 20.1 23.7 19.8 19.7
Operating profit 155 192 172 113 171 205 175 134 576 632 685
OP margin(%) 6.1 7.2 6.3 4.0 6.3 7.5 6.3 4.7 5.2 5.9 6.2
Net profit 82 116 114 40 110 130 108 72 228 351 420
Net margin(%) 3.2 4.4 4.2 1.4 4.1 4.7 3.9 2.6 2.1 3.3 3.8
YoY
Revenue -8.1 -4.1 -1.6 6.6 6.1 3.2 2.4 -0.9 -3.9 -1.9 2.6
Service revenue 4.6 4.4 3.2 0.3 2.9 2.8 3.3 2.0 7.2 3.1 2.8
Wireless 4.4 4.8 2.8 -4.7 1.3 0.7 1.5 2.3 9.3 1.7 1.5
Fixed-line 4.0 4.3 4.3 5.8 5.8 6.6 6.7 5.1 3.1 4.6 6.0
Handsetrevenue -41.7 -28.8 -16.9 36.4 21.3 5.0 -1.0 -11.1 -27.7 -17.7 2.0
Operating profit 36.7 96.3 -1.3 -40.7 10.2 6.5 1.9 18.6 6.4 9.7 8.3
Net profit 207.3 245.7 38.4 -53.6 33.6 12.2 -5.3 83.0 -18.4 54.3 19.5
Key indicators
LTE 8,906 9,216 9,512 9,879 10,190 10,371 10,618 10,864 8,570 9,879 10,864
Fixed-line subscribers 10,035 10,220 10,671 10,809 10,913 11,054 11,181 11,308 9,882 10,809 11,308
Media 2,040 2,123 2,199 2,280 2,355 2,430 2,502 2,575 1,949 2,280 2,575
Notes: Allfigures are basedon consolidatedK-IFRS; Handset revenue recognizedon a net basis from 4Q14; Basednumber of wireless subscribers on MSIP’s official data
dividends at the mid-2% level (dividend payout ratio of 30%)
Figure 51. Supplementing growth: Expansion in IoT business
expected
0
1
2
3
0
100
200
300
400
2014 2015 2016F
(%)(W)
DPS(L)
Dividendyield(R)

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June 3, 2016
LG Uplus (032640 KS/Buy/TP: W14,000)
(Wbn) 12/15 12/16F 12/17F 12/18F (Wbn) 12/15 12/16F 12/17F 12/18F
Cost of Sales 0 0 0 0 Cashand CashEquivalents 292 501 714 719
Operating Profit(Adj) 632 685 707 714 OtherCurrentAssets 228 227 376 437
Operating Profit 632 685 707 714 Non-CurrentAssets 9,352 9,404 9,367 9,337
Non-Operating Profit -166 -128 -115 -102 Investmentsin Associates 7 0 0 0
Net GainfromInvin Associates -1 0 0 0 IntangibleAssets 967 966 962 958
Pretax Profit 466 557 592 612 TotalAssets 11,951 12,235 12,582 12,641
Profit fromContinuing Operations 351 420 446 462 AP &OtherPayables 1,355 1,342 1,355 1,370
Profit fromDiscontinued Operations 0 0 0 0 Short-TermFinancialLiabilities 944 944 944 0
Net Profit 351 420 446 462 OtherCurrentLiabilities 1,055 1,046 1,056 1,711
Controlling Interests 351 420 446 462 Non-CurrentLiabilities 4,148 4,144 4,149 4,154
Non-Controlling Interests 0 0 0 0 Long-TermFinancialLiabilities 3,631 3,631 3,631 0
TotalComprehensiveProfit 336 420 446 462 OtherNon-Current Liabilities 517 513 518 4,154
Controlling Interests 336 420 446 462 Total Liabilities 7,503 7,475 7,503 7,236
Non-Controlling Interests 0 0 0 0 Controlling Interests 4,448 4,759 5,079 5,405
EBITDA 2,241 2,300 2,314 2,315 Capital Stock 2,574 2,574 2,574 2,574
FCF (FreeCashFlow) 417 485 622 626 Capital Surplus 837 837 837 837
Operating ProfitMargin(%) 5.9 6.2 6.3 6.3 Non-Controlling Interests 0 0 0 0
(Wbn) 12/15 12/16F 12/17F 12/18F 12/15 12/16F 12/17F 12/18F
Net Profit 351 420 446 462 P/CF(x) 1.9 2.1 2.1 2.1
Amortization 175 175 174 174 EPS (W) 805 962 1,022 1,057
Others 425 246 218 193 CFPS (W) 5,464 5,224 5,201 5,166
Chg inWorking Capital -361 -50 -31 -36 BPS (W) 10,187 10,900 11,632 12,379
Chg inAR&Other Receivables -223 -30 -15 -17 DPS (W) 250 290 310 320
Chg inInventories -89 3 -3 -4 Payoutratio(%) 31.1 30.2 30.3 30.3
Chg inAP&OtherPayables 7 -3 3 3 Dividend Yield (%) 2.4 2.7 2.9 2.9
CashFlowsfromInvActivities -1,511 -1,674 -1,682 -1,585 EBITDA Growth(%) 7.6 2.6 0.6 0.0
Chg inPP&E -1,363 -1,500 -1,400 -1,400 Operating ProfitGrowth (%) 9.7 8.4 3.2 1.0
Chg inIntangible Assets -172 -175 -170 -170 EPS Growth (%) 53.9 19.5 6.2 3.4
Chg inFinancialAssets 42 1 -112 -15 Accounts Receivable Turnover (x) 7.3 7.2 7.2 7.2
Others -18 0 0 0 InventoryTurnover (x) 33.7 30.5 30.8 30.8
CashFlowsfromFinActivities -406 -109 -127 -435 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0
Chg inFinancialLiabilities -341 0 0 -300 ROA (%) 2.9 3.5 3.6 3.7
Chg inEquity 0 0 0 0 ROE(%) 8.1 9.1 9.1 8.8
Others 0 0 0 0 Liability toEquityRatio(%) 168.7 157.1 147.7 133.9
Increase (Decrease) inCash -124 209 213 5 Current Ratio (%) 77.5 85.0 95.8 107.2
Beginning Balance 416 292 501 714 Net Debt to EquityRatio(%) 95.4 84.8 73.1 62.8
Ending Balance 292 501 714 719 InterestCoverageRatio (x) 3.4 4.1 4.2 4.4

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June 3, 2016
APPENDIX 1
Important Disclosures & Disclaimers
2-Year Rating and Target Price History
Company(Code) Date Rating TargetPrice Company(Code) Date Rating TargetPrice
KT(030200) 06/03/2016 Buy 40,000 10/01/2014 Buy 380,000
05/02/2016 Buy 37,000 08/03/2014 Buy 310,000
01/31/2016 Buy 35,000 05/15/2014 Buy 290,000
11/01/2015 Trading Buy 35,000 LG Uplus(032640) 04/05/2016 Buy 14,000
08/02/2015 Buy 39,000 02/01/2016 Buy 13,000
01/20/2015 Buy 40,000 07/31/2015 Buy 15,000
10/01/2014 Buy 42,000 04/28/2015 Buy 14,000
05/15/2014 Buy 40,000 01/25/2015 Buy 16,000
SK Telecom(017670) 04/29/2016 Buy 280,000 10/01/2014 Buy 15,000
02/02/2016 Buy 300,000 07/31/2014 Buy 11,500
07/31/2015 Buy 350,000 05/15/2014 Buy 13,000
05/06/2015 Buy 360,000
Equity Ratings Distribution
BuyBuyBuyBuy Trading BuyTrading BuyTrading BuyTrading Buy HoldHoldHoldHold SellSellSellSell
68.29% 17.56% 14.15% 0.00%
* Based on recommendations in the last 12-months (as of March 31, 2016)
Disclosures
As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1%
or more of the subject company's shares outstanding.
Analyst Certification
The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to
Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations
thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts
primarily responsible for this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their
households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or
advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any
other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of
the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report
but, like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is impacted by overall firm profitability, which includes
revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the
time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or
Mirae Asset Daewoo except as otherwise stated herein.
Stock Ratings Industry Ratings
Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes
Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening
Sell : Relative performance of -10%
Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term
material development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of
future earnings.
* The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.
0
10,000
20,000
30,000
40,000
50,000
Jun 14 Jun 15 Jun 16
(W)
KT
0
100,000
200,000
300,000
400,000
(W) SK Telecom
0
5,000
10,000
15,000
20,000
(W) LG Uplus

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June 3, 2016
Disclaimers
This report is published by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange.
Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has
not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness,
accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean
language. If this report is an English translation of a report prepared in the Korean language, the original Korean language report may have been
made available to investors in advance of this report. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents do not
accept any liability for any loss arising from the use hereof. This report is for general information purposes only and it is not and should not be
construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The intended recipients of
this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws
and accounting principles and no person whose receipt or use of this report would violate any laws and regulations or subject Mirae Asset
Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof. Information and
opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or form
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their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a
purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or
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business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted
under applicable laws and regulations. The price and value of the investments referred to in this report and the income from them may go down
as well as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not
guaranteed, and a loss of original capital may occur.
Distribution
United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals
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Mirae Asset Daewoo International Network
Mirae AssetDaewoo Co., Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc.
Head Office
34-3 Yeouido-dong, Yeongdeungpo-gu
Seoul 150-716
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Two International Finance Centre
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Tel: 82-2-768-3026 Tel: 85-2-2845-6332 Tel: 1-212-407-1000
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Tel: 86-10-6567-9299 Tel: 86-21-5013-6392 Tel: 84-8-3910-6000
Daewoo InvestmentAdvisory (Beijing) Co., Ltd. Daewoo Securities (Mongolia) LLC PT. Daewoo Securities Indonesia
2401B, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
China
#406, Blue Sky Tower, Peace Avenue 17
1 Khoroo, Sukhbaatar District
Ulaanbaatar 14240
Mongolia
Equity Tower Building Lt.50
Sudirman Central Business District Jl.
Jendral Sudirman Kav. 52-53, Jakarta Selatan
Indonesia 12190
Tel: 86-10-6567-9699 Tel: 976-7011-0807 Tel: 62-21-515-1140

2H16 Telecom Industry Outlook

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