SKT Park Jung-ho Promoted to Vice Chairman... Accelerating Big Tech Leap and Intermediate Holding Company Transition (Comprehensive)

[Asia Economy reporters Seulgina Jo and Soyeon Park] Park Jung-ho, CEO of SK Telecom, has been promoted to vice chairman of the group, signaling the full-scale restructuring of SK Group’s governance, including the transition to an intermediate holding company. The new Vice Chairman Park, who is both CEO of SK Telecom and Vice Chairman of SK Hynix, is expected to lead the group’s core big tech sectors going forward.

On the morning of the 3rd, SK Group held a Supex Council meeting at 10 a.m. and finalized executive appointments and organizational restructuring across affiliated companies reflecting this change. Immediately after the appointment, Vice Chairman Park told Asia Economy Newspaper, "Next year will be another year of significant change and meaning," forecasting major transformations in 2021.

◆ Telecom-Hynix, Core of Governance Restructuring

This personnel move is interpreted as a signal to accelerate SK Telecom’s transition into an intermediate holding company. Currently, SK Group’s governance structure flows from the owner family → SK Inc. → SK Telecom → SK Hynix. SK Hynix is effectively a grandchild company of SK Inc. However, if SK Telecom becomes an intermediate holding company, SK Hynix’s status will change to a subsidiary, lifting the constraints that have hindered aggressive group-level investments and mergers and acquisitions (M&A).

At present, the most likely governance structure is for SK Telecom to be split physically into an investment company and a business company, with the investment company as the intermediate holding company overseeing the business company, SK Hynix, SK Broadband, and others. Another option under discussion is a spin-off followed by merging the investment company with SK Inc., thereby elevating SK Hynix to subsidiary status.

Initially, the market expected the governance restructuring centered on SK Telecom to be completed within one to two years after Vice Chairman Park was appointed chairman of Hynix’s board in March last year. However, as the momentum disappeared due to the COVID-19 pandemic, SK Group appears to have decided that it can no longer delay the governance restructuring. Vice Chairman Park is recognized as a leading M&A expert who led the acquisition of the former Hynix and is considered the right-hand man of SK Group Chairman Chey Tae-won.

The recently announced SK Telecom plan to repurchase its own shares worth 500 billion won is also closely related to this governance restructuring. Vice Chairman Park previously used treasury shares to minimize financial burdens during M&A processes involving SK Infosec and T-broad. SK Telecom’s acceleration of initial public offerings (IPOs) for subsidiaries such as SK Broadband, One Store, and 11st is also seen as a strategic move toward the intermediate holding company transition.

However, the conditions surrounding the group’s governance restructuring are not easy. The so-called “Fair Economy 3 Laws” currently under discussion in the National Assembly include an amendment to the Fair Trade Act that raises the required ownership stake from 20% to 30% for newly established holding companies owning subsidiaries (listed companies). SK Telecom currently holds a 20.1% stake in SK Hynix, so the implementation of this amendment would inevitably impose additional costs amounting to trillions of won. As of the previous day’s closing price, SK Hynix’s stock was 109,000 won, more than double the price at the end of 2016 when Chairman Chey ordered the governance restructuring.

◆ Accelerating 탈(Tal)-Telecom... SK Telecom to Change Its Name

SK Telecom, a core affiliate of SK Group, has been relentlessly advancing its 탈(Tal)-telecom strategy by securing ultra-collaborations with global leading companies such as Amazon and Uber.

At the end of this month, the launch of T Map Mobility, centered on Korea’s largest navigation service T Map, is scheduled. Through this, SK Telecom will complete a blueprint placing five core departments?▲Telecommunications ▲Media ▲Commerce ▲Security ▲Mobility?under the intermediate holding company. Additionally, the recent announcement of the merger between LSH, the parent company of ADT Caps, and SK Infosec aims to create the nation’s top security specialist company.

At the end of last month, SK Telecom partnered with SK Hynix to unveil the AI semiconductor “Sapeon.” AI semiconductors are non-memory chips that perform large-scale computations required for AI services at ultra-high speed and low power, serving as the brain of AI. The launch of the AI semiconductor is significant as it marks SK Telecom’s entry into the future semiconductor market dominated by global big tech companies such as Nvidia, Intel, and Google.

Industry insiders view SK Telecom’s name change amid this 탈(Tal)-telecom movement as the final piece of the puzzle for the intermediate holding company transition and an official declaration of becoming a New ICT comprehensive company. It essentially signals the company’s intention to shed the “telecom operator” label and rise as an ICT comprehensive company standing shoulder to shoulder with global big tech firms like Google and SoftBank.

Under the new name, SK Telecom is expected to maximize its competitiveness in the Fourth Industrial Revolution by leveraging the big data accumulated from its single subscriber base in telecommunications, encompassing platforms across mobility, artificial intelligence (AI), big data, 5G mobile communications, and e-commerce.

Vice Chairman Park has personally proposed various name ideas such as “Hyper Connector,” “T Square,” and “T Mo,” while gathering feedback from employees. He also hinted at preparing a corporate identity (CI) change during the T Factory opening event last October.