[Comprehensive] Splitting into Telecom and Investment Firms... SKT-Initiated 'Deep Change' Kicks Off

[Asia Economy Reporter Joselgina] SK Telecom is splitting into a telecommunications company and an investment company for the first time in 37 years. This is part of the long-standing governance restructuring challenge within the SK Group.

This move by SK Telecom is at the core of the governance restructuring that will determine the group's future and is closely linked to creating future growth engines. In particular, it is interpreted as a declaration to actively invest in semiconductors, which have grown into a key cash cow, replacing the subsidiary SK Hynix that faces many restrictions on business expansion due to governance issues. By establishing growth structures and investment foundations suitable for each sector centered on telecommunications and semiconductors, the company aims to gain proper corporate value recognition.

This also aligns with SK Group Chairman Chey Tae-won's management philosophy of 'Deep Change,' which seeks to drive fundamental transformation beyond merely generating profits within its own domain.

◆Splitting Telecom and Investment Companies... Split Ratio 6 to 4

On the morning of the 10th, SK Telecom held a board meeting and resolved to split into 'SK Telecom' and 'SKT New Investment (tentative name)' through a spin-off. The surviving company will retain the name SK Telecom, and the new company's name will be finalized before the extraordinary shareholders' meeting in October. The split company will be launched on November 1. The split ratio was decided based on net asset book value as 0.6073625 for the surviving company and 0.3926375 for the new company, which is consistent with previously reported levels.

Going forward, the surviving SK Telecom company will focus on AI and digital infrastructure based on telecommunications, while the new company will actively pursue investment activities centered on semiconductors.

Among SK Telecom's existing subsidiaries, most new business areas including SK Hynix will be placed under SKT New Investment. Sixteen companies such as SK Hynix, ADT Caps, 11st, T map Mobility, One Store, Content Wave, Dreamus Company, SK Planet, FSK L&S, Incross, NanoEntek, SparkPlus, SK Telecom CST1, SK Telecom TMT Investment, ID Quantique, and Techmaker will be organized under the new company. The new company will also compete with leading players in security, commerce, and mobility sectors and play a role in securing future growth engines through initial public offerings (IPOs).

The surviving SK Telecom aims to transform into an 'AI and Digital Infrastructure Company' by leveraging its leadership as the number one in 5G. Subsidiaries under the surviving company include SK Broadband, SK Telink, PS&Marketing, F&U Credit Information, Service Top, Service Ace, and SK O&S, which can create synergies in wired and wireless communication businesses.

The CEOs who will lead each company will be announced soon. Industry insiders expect that after the spin-off, CEO Park Jung-ho, who concurrently serves as vice chairman of SK Hynix, will lead the new company, while Yoo Young-sang, head of the mobile network operator (MNO) business, will lead the surviving company.

◆Semiconductor M&A Foreseen Led by Investment Company

The new company, SKT New Investment, which will have SK Hynix as a subsidiary, is expected to actively pursue domestic and international mergers and acquisitions (M&A) first. SK Telecom stated, "SKT New Investment will build a semiconductor ecosystem together with SK Hynix by investing in innovative technologies including future-oriented semiconductors with high growth potential."

Even after SK Telecom's corporate split, SK Hynix will still be a grandchild company under the holding company, maintaining some investment restrictions. However, with SKT New Investment taking the lead, group-level investments and M&A have become possible. At the center of future moves is CEO Park, known as an 'M&A gambler' who led the acquisition of the former Hynix during the semiconductor crisis. CEO Park, who concurrently serves as vice chairman of SK Hynix, is expected to head the new company. He recently stated in an official setting, "We need to invest more in foundries," indicating plans to expand semiconductor facilities.

The market believes that the spark for merging SK Hynix into SK Inc. as a subsidiary from a long-term perspective has not been extinguished. A securities industry official said, "To minimize market uncertainty ahead of IPOs of subsidiaries like One Store, the current governance structure will be maintained for at least a few years," but added, "In the long term, they will likely seek to remove investment restrictions on SK Hynix through a merger between the new company and SK Inc."

The listing of new ICT subsidiaries under the new company is also expected to gain momentum. The strategy is to create a virtuous cycle of 'profit generation and reinvestment' starting with successful IPOs. Most new business areas of SK Telecom subsidiaries preparing for IPOs, such as One Store, Wave, 11st, ADT Caps, and T map Mobility, will be placed under the investment company.

◇Maximizing Shareholder Value... ‘Financial Story’ for ‘Deep Change’

Another goal of this spin-off is to maximize shareholder value. SK Telecom envisions accelerating growth in both telecommunications and new businesses to be fully re-evaluated for corporate value and enhance shareholder value. This aims to overcome the reversal phenomenon where subsidiary SK Hynix's market capitalization far exceeds SK Telecom's.

The board also approved a stock split proposal on the same day in the same context. Accordingly, one common share with a face value of 500 won will be split into five shares with a face value of 100 won each. The total number of SK Telecom shares issued will increase from the current 72,060,143 shares to 360,307,150 shares.

A stock split, which increases the total number of shares by lowering the face value per share without increasing capital, is considered a positive factor that boosts trading volume, stock price, and market capitalization in the stock market. SK Telecom aims to lower entry barriers and increase the proportion of small shareholders, transforming into a 'national stock' that any investor can easily access.

This also connects with Chairman Chey’s emphasized 'Financial Story.' The Financial Story is a management strategy to enhance overall value by presenting growth strategies and future visions to customers, investors, and the market.

It is also an extension of the 'Deep Change' that Chairman Chey has repeatedly emphasized. Deep Change, which guarantees corporate survival through fundamental transformation, has been a powerful message driving changes in SK Group affiliates amid rapidly changing environments and crises over the past decades. CEO Park, considered Chairman Chey’s trusted lieutenant, has been recognized as a CEO who understands and implements this message well. This is why the corporate split is being evaluated not merely as governance restructuring but as 'SKT-led Deep Change' and the beginning of the 'SKT 2.0 era.'

CEO Park said, "The split into SK Telecom and SKT New Investment marks the opening of the SKT 2.0 era that opens a bigger future," and emphasized, "We will contribute to the development of Korea's ICT ecosystem through the company's future growth."