Overwhelming Support for 'SKT 2.0'... Splitting Telecom and Investment Units, Announcing 'Global M&A' (Comprehensive Report 2)

[Asia Economy reporters Seulgina Jo and Minyoung Cha] "We will consider deals regardless of domestic or international."

SK Telecom is entering the 'SKT 2.0 era' starting this November as it splits into a telecommunications company and an investment company after 37 years since its founding. Centered on the newly established investment specialist company, SK Square, mergers and acquisitions (M&A) activities crossing borders in the semiconductor as well as tech and platform sectors are expected to accelerate. Park Jung-ho, CEO and an 'M&A strategist' who led the acquisition of Hynix during the semiconductor crisis, visited the United States earlier this month to personally seek investors ahead of this corporate split. There is also growing speculation about Amazon's potential strategic investment participation.

◇ SKT-SK Square Split Approved with 99.95% Support at General Meeting

On the morning of the 12th, SK Telecom held an extraordinary general meeting at its headquarters in SK Telecom T Tower, Euljiro, Seoul, and approved key agenda items including the 'Approval of the Split Plan.' The approval rate for the spin-off agenda based on shares present was 99.95%, and the approval rate for the stock par value split agenda was 99.96%, receiving overwhelming support from both institutional and individual shareholders.

Accordingly, the surviving company SK Telecom and the newly established company SK Square will officially launch on the 1st of next month. The current SK Telecom will undergo a stock trading suspension period (October 26 to November 26) and will be re-listed as SK Telecom and SK Square respectively on November 29. Going forward, SK Telecom will focus on AI and digital infrastructure based on existing wired and wireless telecommunications, while the new company will concentrate on ICT investments centered on semiconductors. The split ratio is 0.607 for SK Telecom and 0.392 for SK Square.

CEO Park Jung-ho stated at the general meeting, "We will demonstrate growth capabilities through investments in semiconductor and platform innovation companies," adding, "Both companies will build faster growth stories under the clear identities of 'telecommunications' and 'investment,' respectively."

This split is interpreted as a move to establish growth structures and investment foundations suitable for each sector centered on telecommunications and semiconductors, thereby creating future growth engines and gaining proper corporate value recognition in the market. It also signals a declaration to actively pursue semiconductor investments, which have grown into the group's core cash cow, replacing the subsidiary SK Hynix that faces governance constraints on business expansion.

The new company will be led by CEO Park, who concurrently serves as vice chairman of SK Hynix. Park explained, "As a semiconductor and ICT investment specialist company, we aim to play the role of an 'Investing Producer.'" Most of the new business areas, including SK Hynix, among SK Telecom's subsidiaries, have been reorganized under SK Square. The companies involved include SK Hynix, ADT Caps, 11st, T map Mobility, One Store, Contents Wave, Dreamus Company, SK Planet, FSK L&S, Incross, NanoEntek, SparkPlus, SK Telecom CST1, SK Telecom TMT Investment, ID Quantique, and Techmaker.

Based on the investment success DNA accumulated through semiconductor and ICT platform business investments, the vision is to grow the current net asset value of 26 trillion KRW to approximately 75 trillion KRW by 2025, nearly tripling it. As the company name means 'square' or 'plaza,' SK Square plans to invigorate the entire Korean ICT industry through bold and proactive investments based on key portfolio assets such as semiconductors, media, security, and commerce.

The surviving company SK Telecom aims to transform into an 'AI and Digital Infrastructure Company.' It plans to increase annual sales from 15 trillion KRW in 2020 to 22 trillion KRW by 2025. To achieve this, it will focus on its three core businesses: wired and wireless telecommunications, AI-based services, and digital infrastructure services. Subsidiaries that can create synergy with wired and wireless telecommunications include SK Broadband, SK Telink, PS&Marketing, F&U Credit Information, ServiceTop, ServiceAce, and SK O&S. The new CEO is expected to be Yoo Young-sang, head of the mobile network operator (MNO) business.

◇ Global M&A in Semiconductors and More Expected... Attention on SK Square's Moves

Following this split, global M&A activities in the tech and platform sectors are expected to increase soon. Park, an M&A expert, previously stated at meetings with domestic and international investors that SK Square plans to invest 5 trillion KRW over the next three years after its launch.

The highest priority is semiconductor investment, focusing on synergy creation with SK Hynix, a subsidiary of the new company and a core group growth engine. The company will actively pursue a 'bolt-on' strategy by acquiring related or similar industry companies domestically and internationally to maximize synergy.

Notably, Park spent about 10 days in the United States earlier this month meeting global investors in person. This is interpreted as both preparatory work for large-scale M&A after the split and efforts to attract global investment.

At the general meeting, Park told reporters, "When I was doing overseas IR ahead of SK Square's launch, the first words from shareholders were 'thank you,' which I appreciated," adding, "We will strive to become a better company and support better growth." Regarding cooperation with Amazon, he said, "It is going better than expected, and discussions are underway for their participation as a shareholder." However, he smiled and refrained from answering when asked about SK Square's first investment target.

Currently, SK Square is exploring investment opportunities not only in high-tech areas such as semiconductors but also in ▲ media, commerce, and mobility as 'big tech' (life platforms) and ▲ digital healthcare and blockchain as 'deep tech' (global ICT). The goal is to raise the company's net asset value to around 75 trillion KRW by 2025, about three times the current level.

The surviving company SK Telecom will also expand ultra-collaboration with global companies including Amazon. The partnership network for the newly launched subscription service 'T Universe' in the second half of the year will be extended to global companies. Cooperation plans with Apple TV Plus are also expected to be announced within the year.

CEO Jung-ho Park

◇ Park Jung-ho: "The Biggest Purpose of the Split is Maximizing Shareholder Value"... Writing a Financial Story

SK Telecom particularly cites maximizing shareholder value as one of the main goals of the split. The vision is to accelerate growth on both the existing telecommunications and new business sides, thereby fully re-evaluating corporate value and enhancing shareholder value.

On this day, CEO Park said, "The biggest purpose of the split is maximizing shareholder value," emphasizing, "Although SK Telecom successfully diversified its portfolio, it was evaluated within the single frame of telecommunications and thus did not receive full value recognition. By separating telecommunications business and ICT investments, we will proudly have the portfolio value recognized by the market and return it to our shareholders."

SK Telecom first officially announced the push for a spin-off in April this year, clearly stating the goal of receiving full corporate value evaluation to accelerate future growth and enhance shareholder value. In May, it effectively canceled all 8.69 million treasury shares (about 10.8% of total issued shares), and in June, the board resolved the approximately 60:40 spin-off ratio between SK Telecom and SK Square, continuing efforts to enhance shareholder value. Thanks to this, SK Telecom's current stock price has risen about 30% compared to the beginning of the year.

At the general meeting, the agenda for amending the articles of incorporation related to stock par value split was also approved in the same context. Currently, one common share with a par value of 500 KRW will become five shares with a par value of 100 KRW each. The par value split, which increases the total number of shares by lowering the par value without increasing capital, is considered a positive factor in the stock market as it boosts trading volume, stock price, and market capitalization. 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 move also aligns with the 'financial story' emphasized by SK Group. The financial story is a management strategy that aims to enhance overall value by presenting growth strategies and future visions to customers, investors, and the market.

Market reactions are positive. Namgon Choi, an analyst at Yuanta Securities, said, "SK Square is expected to lead value enhancement after the split," adding, "Unlike typical holding companies, SK Square houses SK Group's core platform and content subsidiaries. The combined market capitalization of the two companies after the split is expected to range between 21 trillion and 28 trillion KRW." Kim Hoe-jae, an analyst at Daishin Securities, said, "Based on SK Telecom's pre-split status, applying the sum-of-the-parts (SOTP) valuation method combining core business value and the long-term normalized value of subsidiaries, a corporate value of 30 trillion KRW is possible," adding, "There may be valuation controversies in the short term before and after the split, but ultimately, the value of various subsidiaries will be highlighted, and the combined corporate value will increase."

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