"Raise Corporate Value" Telecom 3 Giants' All-Out Battle... Combined Market Cap Still Falls Short of Naver

[Asia Economy Reporter Seulgina Jo] "The biggest concern is that the stock price is too undervalued." (Koo Hyun-mo, CEO of KT)

The CEOs of the three major telecom companies are struggling with stock prices that rarely rise. Although they are leading digital transformation based on artificial intelligence (AI), big data, and cloud services following the commercialization of 5G, the combined market capitalization of the three telecom companies falls far short of that of a single company like Naver or Kakao. SK Telecom, which needs to expedite its group governance restructuring, as well as KT and LG Uplus, have all prioritized "enhancing corporate value" as one of their key management tasks for next year.

◆"Undervalued" Telecom 3 Companies' Stock Price Concerns

According to industry sources on the 7th, the three telecom companies have set a policy to enhance their corporate value through strategies such as subsidiary initial public offerings (IPOs), group restructuring (business structure reorganization), and expansion of new businesses next year. Each company is also considering measures such as share buybacks and dividend increases.

This is based on the management's judgment that their stock prices are undervalued in the market. As of the closing price on the 4th, the market capitalizations of the three telecom companies were SK Telecom at 19.3386 trillion KRW, KT at 6.3711 trillion KRW, and LG Uplus at 5.1738 trillion KRW. Even combined (30.8835 trillion KRW), their total market cap does not surpass Naver (48.2934 trillion KRW) or Kakao (34.3849 trillion KRW).

The three telecom companies lament that they are confined within the traditional 'telecom' industry, which bears heavy network investment burdens and regulatory impacts, and thus are not properly recognized in the market as leading companies of the 'Digital New Deal.' Internally, there are even criticisms asking, "Why are we not classified as beneficiaries of the Digital New Deal?" This is closely related to the recent aggressive push by the three companies to move beyond traditional telecom. CEO Koo expressed at a press conference held in October, "The biggest concern in the second half of the year has been that the stock price, i.e., corporate value, is not well reflected in the market."

KT, which was listed 18 years ago at an initial public offering price of 54,000 KRW per share, is currently trading around 24,000 KRW per share. LG Uplus, which fell below 10,000 KRW due to the COVID-19 shock in March, is recently trading around 12,000 KRW. SK Telecom, which once touched 300,000 KRW, remains around 230,000 KRW.

◆Subsidiary IPOs... Even Dividend Increases

The three companies are expected to mobilize all possible means to raise their corporate value. Not only SK Telecom, which is tasked with group governance restructuring such as transitioning to a holding company, but also KT, which has seen a continuous decline in stock price since listing, and LG Uplus, which has entered a new management system, face the urgent task of boosting their stock prices.

SK Telecom has announced a 500 billion KRW share buyback plan and is accelerating subsidiary IPOs such as One Store. The strategy is to increase corporate value through subsidiary IPOs. One Store completed the selection of its lead underwriter in September, and ADT Caps, 11st Street, and SK Broadband are also lined up for IPOs. In particular, SK Telecom’s stock price boost is considered even more important as it is linked to the group governance restructuring task. An industry insider mentioned, "The funds needed to secure SK Hynix shares during the transition to a holding company are expected to be in the trillions of KRW."

KT has also started acquiring its own shares worth 300 billion KRW and is reviewing an increase in dividend size. In addition, the group restructuring that CEO Koo has mentioned is expected to be concretized starting next year. The merger of subsidiaries KTH and KT M-House is expected to be completed around July next year. This is interpreted as a plan to consolidate commerce capabilities scattered across the group and to fully launch the commerce business. KT Enterprise, recently launched by combining new technologies and B2B capabilities, is rumored to be spun off.

Hwang Hyun-sik, the 'sales expert' who will officially take office as CEO of LG Uplus early next year, cannot help but worry about the company’s corporate value, which is the lowest among the three companies. LG Uplus has recorded earnings surprises for four consecutive quarters since last year, but its stock price has not broken out of the box range. LG Uplus is currently considering increasing dividends.

This content was produced with the assistance of AI translation services.