SKT Formalizes Demerger... Splitting into Telecom Operator and Holding Company (Update)

CEO Park Jung-ho Holds Town Hall Meeting to Outline Direction

[Asia Economy reporters Seulgina Jo and Minyoung Cha] The long-awaited blueprint for SK Group's corporate governance restructuring was unveiled on the 14th. As initially expected, SK Telecom will undergo a spin-off, dividing into an investment company and a mobile telecommunications business company. SK Telecom is also conducting a town hall meeting for its employees immediately after the disclosure.

On the afternoon of the 14th, SK Telecom announced, "To enhance shareholder value and accelerate growth, we plan to spin off SK Telecom into a holding company that owns semiconductor and new ICT assets such as SK Hynix, ADT Caps, 11st, and T map Mobility, and a wired and wireless telecommunications company including SK Broadband."

Accordingly, the surviving company after the spin-off will expand its business based on wired and wireless telecommunications into areas such as AI subscription marketing and data centers. Meanwhile, the newly established company will evolve and grow as a global ICT specialized investment company including semiconductors. SK Telecom plans to make decisions regarding the spin-off within the first half of the year.

SK Telecom CEO Jung-ho Park is currently holding a virtual town hall meeting for employees from 3:40 PM to 4:10 PM on the day of the announcement. It is expected that he will explain the detailed direction of the corporate governance restructuring at this meeting.

Upon the spin-off, CEO Park is expected to lead the investment company, while Young-sang Yoo, head of the mobile network operator (MNO) business, will lead the business company. CEO Park also concurrently serves as the CEO of SK Hynix.

The primary purpose of this corporate governance restructuring is to recognize the corporate value of SK Telecom, which has been overshadowed by its telecommunications core business, while enabling aggressive investment and mergers & acquisitions (M&A) by SK Hynix, the group's key affiliate.

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. Due to this, under the current Fair Trade Act, only acquisitions of companies with 100% equity are possible, imposing restrictions.

Moreover, according to the amended Fair Trade Act to be enforced next year, new holding companies must increase their subsidiary shareholding ratio to 30%, requiring SK Inc. to acquire additional shares of SK Hynix. Given SK Hynix's market capitalization exceeding 100 trillion won, securing additional shares poses a financial burden. If SK Telecom becomes an intermediate holding company and is later merged into SK Inc., SK Hynix's status will change to that of a subsidiary.

However, CEO Park is reportedly expressing that, reflecting shareholders' concerns, the merger between the intermediate holding company and SK Inc. will not proceed for the time being. Earlier, at last month's shareholders' meeting, CEO Park mentioned, "We will ensure that the greatest benefits go to shareholders and members," which is interpreted as a pre-announcement of the spin-off considering such concerns.

Starting with this corporate governance restructuring, it is expected that the IPOs of New ICT sector companies such as 11st, ADT Caps, and T map Mobility will gain momentum.