A massive hacking incident is costing SK Telecom a fortune, sending its second-quarter profits plummeting by a stunning 37.1%. The data leak was so damaging that the company lost 750,000 subscribers in just three months.
The company’s sales also took a hit, dropping 1.9% to 4.33 trillion won. During an earnings call, SK Telecom’s finance chief, Kim Yang-seob, explained that the financial damage came from multiple directions. The company lost revenue from the customers who left, and had to spend heavily on free replacement SIM cards and compensation for its sales partners.
To fix the mess and regain trust, SK Telecom is promising to spend big. The company pledged to invest 700 billion won (about $500 million) over the next five years to enhance its IT and information security capabilities. It plans to completely restructure its security systems based on a “zero trust” principle.
SK Telecom is also trying to win back customers. It’s offering free, world-class mobile security software to all users for a year and has set up a compensation system for victims of the data leak. To lure back those who left, the company is offering substantial discounts, a move it admits will hurt profits even more in the next quarter.
There was one bright spot in the otherwise grim report. The company’s artificial intelligence (AI) business is growing, with its AI data center division seeing a 13% jump in revenue. But for now, the company is focused on damage control and paying the very high price for a major security failure.
