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SK Telecom’s board approves splitting up the group

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The board of directors agreed to separate the company into SK Telecom and SKT Investment.

SK Telecom is widely seen as one of the most forward-thinking network operators in the world. Now its board has approved this move as a “horizontal spin-off” – the creation of two separate companies – which was first mooted last October.

Two is more than one

The idea is that the two separate companies are more valuable than one: “SK Telecom and the new entity both have the vision to increase enterprise value and shareholder value by accelerating growth in their respective fields of business”.

The spin-off will be effective on 1 November, 2021 after an extraordinary meeting of shareholders to be held on October 12, 2021. To make shares more accessible to shareholders and increase enterprise value, SK Telecom will promote a stock split simultaneously with the spin-off.

The stock split is expected to boost minority shareholders’ investment by increasing the number of outstanding stocks.

“The horizontal spin-off will mark the beginning of a new era for SK Telecom,” said Park Jung-ho, CEO of SK Telecom. “We will make best efforts to contribute to the advancement of the ICT ecosystem by achieving new and sustainable growth.”

SK Telecom is also planning to spin off its ONE Store this year, and appears to have accelerated its plans ahead of a change in the Korean law: the new so-called fair trade law, which comes into effect next year, stipulates that newly established holding companies must have a 30% or more stake in publicly listed subsidiaries, up from 20% now.

It is interesting this announcement came at more or less the same time as TDC announced the separation of its business has been finalised but here the split is putting the network assets and the customer-facing services business into two distinct entities. CETIN in the Czech Republic took the same route in 2016.

The rump

The rump, SK Telecom, will be “an AI and digital infrastructure company that sustains stable and solid growth” The intention is to grow in fixed and wireless access, and home media based on its leadership in the 5G market.

It will advance its services like Metaverse and subscription-based offerings by applying AI technologies. It will also build on AI and its digital infrastructure to increase investment in data centres and its mobile edge computing (MEC) cloud business for new revenue.

Investment arm

SKT Investment is the temporarily-named investment company spun out to invest in semiconductors and ICT. The permanent name will be announced in due course.

It is to pursue mergers and acquisitions in the global semiconductor market. It plans to build a semiconductor ecosystem with SK Hynix by investing in innovative technologies including future semiconductor technologies.

It will also strive to strengthen its competitiveness by attracting domestic and overseas investment in diverse ICT areas including security (ADT Caps), commerce (11st) and mobility (T Map Mobility) and promote initial public offerings (IPOs) of its subsidiaries to secure future growth engines.

Many parts

The new investment unti will have the following 16 companies under its umbrella: SK Hynix, ADT Caps, 11St, T Map Mobility, One Store, Contents Wavve, Dreamus Company, SK Planet, FSK L&S, Incross, NanoEnTek, Sparkplus, SK Telecom CS T11 (an esports joint venture between SK Telecom and Comcast Spectaco), SK Telecom TMT Investment (handles investment activities in the US), ID Quantique (a quantum-safe cryptography company based in Switzerland) and Techmaker (the techn joint venture between SK Telecom and Deutsche Telekom).