SKT Park Jung-ho "Mission Not Decided... Strategic Shareholders Including Amazon May Also Be Invited" (Comprehensive)

The Ministry of Science and ICT and the three telecommunications companies SK Telecom, KT, and LG Uplus signed a business agreement on the "Rural 5G Shared Use" on the 15th at the Kensington Hotel in Yeouido. Park Jung-ho, CEO of SK Telecom, is attending the signing ceremony.
[Image source=Yonhap News]

[Asia Economy reporters Seulgina Jo and Eunmo Koo] Park Jung-ho, CEO of SK Telecom, who unveiled the governance restructuring plan, stated that he has not yet decided on the new company name. He also suggested the possibility that the surviving entity, which will focus on the existing telecommunications business as well as artificial intelligence (AI) and digital infrastructure, might retain the name "Telecom." Furthermore, he mentioned that strategic shareholders such as Amazon could be brought in during the process of the spin-off.

◆Park Jung-ho: "The surviving company might as well keep 'Telecom'"

On the 15th, after the ‘Rural 5G Shared Use Business Agreement’ event held at the Kensington Hotel in Yeouido, Seoul, CEO Park told reporters, "I have not decided (on the company name) yet." He added, "If there is a good name, please let me know," and further said, "The surviving company might as well keep using 'Telecom'."

The day before, SK Telecom revealed a governance restructuring plan centered on a spin-off into the surviving company ‘AI & Digital Infrastructure Company’ and the newly established company ‘ICT Investment Specialist Company.’ The change of SK Telecom’s name is considered a key piece of this governance restructuring and an official declaration of becoming a New ICT comprehensive company. This essentially means shedding the label of a ‘telecom company’ and aiming to leap forward as an ICT comprehensive company standing shoulder to shoulder with global big tech firms like Google and SoftBank.

Regarding the subsidiaries to be placed under the surviving and newly established companies, CEO Park mentioned, "One Store will go to the investment specialist company. Wave will naturally also go to the investment specialist company."

According to the governance restructuring plan disclosed by SK Telecom, the investment specialist company, which will launch with about 100 employees by the end of this year, will be responsible for expanding new non-telecom businesses such as semiconductors and mobility. Besides One Store and Wave, which CEO Park mentioned, subsidiaries like SK Hynix, 11st, ADT Caps, and T Map Mobility are also expected to be placed under it. Meanwhile, the surviving company, led by AI and digital infrastructure, will have SK Broadband and focus on existing telecommunications and IPTV businesses. New businesses include cloud, data centers, and AI-based subscription services.

◆Expectations for 'Strategic Reallocation of Shareholders'

On this day, CEO Park emphasized that the biggest expectation from the corporate split is the strategic reallocation of shareholders. He explained, "Only shareholders who focus on the telecommunications business can enter a listed company like SK Telecom," adding, "Now that the portfolio has diversified, this is to create opportunities for various shareholders to participate."

This can be seen as an extension of his usual criticism that SK Telecom and its new business subsidiaries have not been fully recognized for their value in the market. Currently, SK Telecom is the second-largest company by market capitalization in Korea and holds a 20.1% stake in SK Hynix, which is worth nearly 100 trillion KRW, making it the largest shareholder. However, SK Telecom’s market capitalization is about 20 trillion KRW, which is roughly equivalent to the value of its stake in SK Hynix alone.

SK Telecom explained, "The purpose of this spin-off is to have the telecommunications, semiconductor, and New ICT assets fully evaluated by the market, accelerate future growth, and enhance shareholder value." Choosing a spin-off (human split) preferred by the market rather than a physical split, and officially stating that there are no plans to merge the new company with SK Inc., are decisions made with shareholders in mind.

In particular, CEO Park expressed an open stance that companies like Amazon, which are currently cooperating intensively in commerce and other fields, could become strategic investors (SIs) in the future. He emphasized, "Since the split will take about six months, we can also invite strategic shareholders in terms of shareholder composition," adding, "Perhaps the investment specialist company can have opportunities to go global."

◆What about semiconductor investment?

Regarding semiconductor mergers and acquisitions (M&A), CEO Park said, "Actually, there were such plans, but what has become a higher priority is the rapid restructuring of the semiconductor industry due to the US-China semiconductor conflict." He added, "It seems better to prepare for a bigger move," but also noted, "However, mergers and such are not free right now."

Currently, SK Group’s governance structure flows from the owner family → SK Inc. → SK Telecom → SK Hynix. Since SK Hynix is a grandchild company of SK Inc., current fair trade laws restrict acquisitions to 100% ownership only. Initially, there was talk of merging the new company with SK Inc. after the spin-off, but SK Telecom has confirmed, "There are no plans for a merger."

Accordingly, SK Hynix, which will be placed under the new company, will maintain its position as a grandchild company of SK Inc., so business expansion will still face limitations. However, SK Telecom explains that the new company can act on its behalf, so there is no problem with semiconductor business investments. Especially since CEO Park has been recognized as a dealmaker in M&A, having led the acquisition of the former Hynix during the semiconductor crisis, attention is focused on the future moves of the investment specialist company.

Decisions regarding subsidiary placement related to the spin-off and whether to cancel treasury shares will be finalized before June. Subsequently, shareholder meetings are expected around August to September, followed by the spin-off and listing in November. The split ratio is being considered as 6 for the surviving company to 4 for the new company.