SK Telecom, SK Broadband ratings affirmed at A- with stable outlook

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SK Telecom & Broadband rating stable

Highlights

Fitch affirmed SK Telecom and SK Broadband's Long-Term Issuer Default Ratings at 'A-' with stable outlook, citing leading market position and resilient infrastructure.
EBITDA dropped nearly 20% in 2025 due to a data breach, but Fitch projects earnings and customer base to rebound to pre-breach levels by 2026.
SK Telecom's enterprise segment grew at a high single-digit rate in 2025, with further growth expected from AI strategy, data center expansion, and SK Broadband's planned split by February 2027.

Rating rationale and earnings recovery

As reported by Fitch Ratings, the agency has affirmed the Long-Term Foreign- and Local-Currency Issuer Default Ratings of SK Telecom Co., Ltd. and its subsidiary SK Broadband Co., Ltd. at 'A-', with a stable outlook. Fitch says the ratings reflect SK Telecom's leading position in Korea's oligopolistic telecom market, a benign competitive landscape and established network infrastructure.

Fitch expects profitability to recover in 2026 after a temporary weakening in 2025 following a data breach incident. EBITDA fell by nearly 20% in 2025 because of higher costs tied to the breach, including free USIM replacements, fee discounts, waived termination penalties and a one-off voluntary early retirement program, but the agency expects earnings to return to pre-breach levels as marketing costs stabilize and the labor cost base declines.

Subscriber losses were significant when termination penalties were waived, but Fitch expects SK Telecom to gradually rebuild its customer base over the next couple of years. The agency says that process should be supported by stabilizing competition, similar security issues faced by peers, and a normalization of marketing spending and churn dynamics.

Fitch also forecasts modest growth in wireless operations of 1% to 2% a year. While the 5G market is becoming saturated, with penetration in South Korea at 68% of subscribers including mobile virtual network operators as of end-July 2026, average revenue per handset user is expected to rise through higher-priced 5G tariff plans; SK Telecom's 5G subscriber base increased to 18 million at end-June 2026 from 17.5 million at end-December 2025.

AI strategy, restructuring and market impact

Fitch says SK Telecom's expanding enterprise segment, including data centers, cloud services and AI-based business solutions, provides longer-term growth potential. The segment grew at a high single-digit rate in 2025, and the agency expects that pace to continue as utilization of the company's data centers gradually improves and capacity expansion moves ahead.

The rating agency also highlights SK Telecom's stronger focus on AI and digital infrastructure. Under that strategy, SK Telecom plans to split SK Broadband into two companies, with SK Broadband retaining the core fixed-line business while the data center and subsea cable businesses move to SK Horizon; the split is scheduled for completion in February 2027, and SK Telecom has also established wholly owned SK Hyper to lead data center development and long-term capacity expansion.

Fitch expects capital expenditure in 2026 to exceed KRW2.3 trillion recorded in 2025, as lower network spending is offset by higher investment in enterprise and AI-related operations. Even so, the agency expects net leverage to improve to around 1.5x as operating cash flow recovers and to remain near that level in the near term.

For SK Broadband, Fitch equalizes the subsidiary's ratings with those of SK Telecom, citing high strategic and operational incentives for parent support. The agency says SK Broadband's fixed-line operations remain important to SK Telecom's competitive position against integrated rivals such as KT Corporation and LG Uplus Corp., while SK Broadband's standalone credit profile remains at 'bbb-' because stable cash flow and market position are balanced by lower diversification and more limited growth in its remaining businesses after the split.

Our earlier article on the U.S. AI data center boom explained that a large share of announced projects is being questioned as financing costs rise and construction timelines slip. It also noted that cost overruns, investor caution, power-grid constraints and growing local opposition are making it harder for developers to deliver new capacity on schedule and within budget.

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