SKT's Transition to Intermediate Holding Company, 'Blueprint' Revealed Today... Subsidiary Allocation?

SK Hynix Investment and M&A Restrictions
Resolved by Transition to SK Corporation Subsidiary through Governance Restructuring
Spin-off of Investment Company and Mobile Telecommunications Business Company Likely

Park Jung-ho, CEO of SK Telecom, is presenting management performance and vision to shareholders at the 37th regular general meeting of shareholders held on March 25 at the T Tower headquarters in Euljiro, Seoul. At this event, CEO Park announced, "We are preparing for a governance restructuring" and "It will be materialized soon." [Image source=Yonhap News]

[Asia Economy Reporter Minyoung Cha] The long-standing challenge of SK Group’s governance restructuring blueprint is expected to be unveiled this afternoon (14th). Industry insiders widely anticipate that SK Telecom will undergo a spin-off into an investment company and a mobile telecommunications business company. As SK Telecom’s subsidiaries have also begun full-scale preparations for listing in line with the overall governance restructuring, expectations are growing that the total market value will increase in the mid to long term.

SK Hynix Incorporated as a Subsidiary of the Investment Company

According to related industry sources on the 14th, SK Telecom CEO Jung-ho Park plans to hold a town hall meeting-style briefing for subsidiary executives and employees after the market closes today to explain the direction of the governance restructuring.

The most likely plan is to split SK Telecom into an investment company and a business company, placing some subsidiaries such as SK Hynix and 11st under the investment company, and telecommunications-related subsidiaries like SK Broadband under the business company. If the spin-off occurs, it is expected that CEO Park Jung-ho will lead the investment company, while Yoo Sang-young, head of the mobile network operator (MNO) business, will lead the business company. CEO Park also concurrently serves as the CEO of SK Hynix.

A company official explained, "The detailed placement of subsidiaries has not yet been finalized," adding, "It is highly likely that the New ICT sector, which focuses on new businesses, will be placed under the investment company." The New ICT divisions, including 11st, ADT Caps, and T map Mobility, are also preparing for initial public offerings (IPOs).

The primary purpose of this governance restructuring is to enable SK Hynix to pursue aggressive investments and mergers and acquisitions (M&A). 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. Because SK Hynix is a grandchild company of SK Inc., current Fair Trade Act regulations restrict it to acquiring companies only in a 100% equity form.

Additionally, under the revised Fair Trade Act to be implemented next year, new holding companies must increase their subsidiary shareholding ratio to 30%, which means SK Inc. must 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.

Furthermore, the restructuring is interpreted as an effort to re-evaluate SK Telecom’s asset value and growth potential, which have been overshadowed by its telecommunications core business, thereby enhancing corporate value.

The market is paying close attention to how the interests of controlling shareholders and minority shareholders may differ depending on the method of corporate division. Earlier, CEO Park mentioned, "We will ensure that the greatest benefits go to shareholders and members," which is seen as a pre-announcement of the spin-off considering such concerns.

It is also reported that CEO Park will express the position that the merger between the intermediate holding company and SK Inc. will not proceed for the time being, reflecting shareholders’ concerns.

"Subsidiaries’ Corporate Value Expected to Reach 20 Trillion Won"

The governance restructuring is expected to accelerate the IPO schedules of new business subsidiaries.

This year, app market One Store and online video service (OTT) Wavve are expected to launch, followed by 11st, ADT Caps, and SK Broadband next year. CEO Park Jung-ho also stated at the SK Telecom shareholders’ meeting, "One Store will be listed first, and Wavve will be the next to prepare," adding, "The timing of concretizing these plans is expected to coincide with our governance announcement around April to May."

The highly anticipated IPO of 11st is expected to require more preparation time. This reflects the intention to strengthen its presence as a commerce subsidiary and gain higher market recognition. Recently, SK Telecom’s entry into the bidding for eBay Korea, which owns Gmarket, is seen as a move to enhance 11st’s competitiveness. 11st is regarded as having gained commerce momentum through the partnership between SK Telecom and Amazon last year. This year, it plans to formalize fulfillment partnerships with the Korea Post and expand live commerce.

In the securities industry, the total corporate value of these new business subsidiaries is expected to exceed 20 trillion won. Namgon Choi, a researcher at Yuanta Securities, said, "The value of subsidiaries held by SK Telecom is at least over 20 trillion won, and the value of One Store applied in the 20 trillion won valuation is only about 250 billion won."

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