Dividend Party
Amid a sluggish growth in the domestic telecommunications industry, SK Telecom has become the only company that gives out large dividends among the local mobile carriers. The company plans to distribute 9,000 won (US$7.49) per share to stockholders, which is six times higher than that of its competitors, after the general stockholders’ meeting on March 18. With the government strengthening market regulation, SK Telecom is being criticized for reducing the investment and enriching its founder’s family and foreign investors with national communication expenses.
According to the Data Analysis, Retrieval and Transfer System from the Financial Supervisory Service on March 10, SK Telecom’s total amount of distribution will reach 635.48 billion won (US$529.13 million), which means 10,000 won (US$8.33) per share including 1,000 won (US$0.83) of an interim dividend per share, based on accounting standards in 2015. The figure is up 6.6 percent, or 39.6 billion won (US$32.97 million), from a year earlier.
It is also up to six times higher than KT’s 1224.2 billion won (US$101.93 million), which means 500 won (US$0.42) per share, and LG U+’s 1091.5 billion won (US$90.88 million) meaning 250 won (US$0.21) per share. SK Telecom’s dividend rate also stands at 3.5 percent, which is higher than KT’s 1.7 percent and LG U+’s 2.3 percent. The figure is almost three times higher than 1.2 percent of an average rate of KOSPI.
SK Telecom had maintained its dividend at 9,600 won (US$7.99) for eight years since 2007 but increased it to 10,000 won (US$8.33) last year. Market watchers believe that the company had been able to set high dividends and raise it further last year since the competition structure of 5 to 3 to 2 has become permanent in the domestic mobile communication market and the structure will set in further in the future, which will lead to stable profits.
Its competitors and consumers are critical of SK Telecom’s large dividends. As the dominant player in the market, the company posts nearly 2 trillion won (US$1.67 billion) in operating profit every year but it gives out high dividends to foreign shareholders and its founder’s family instead of the reduction of communication costs and the investment in next-generation facilities. The company’s ratio of foreign shareholders is about 40 percent. When the general shareholders’ meeting on March 18 is over, more than 250 billion won (US$208.16 million) of dividends will go to foreign investors. SK Holdings, the holding company of SK Group that owns a 25 percent stake in SK Telecom, distributed approximately 56 billion won (US$46.63 million) to its chairman Chey Tae-won, the largest shareholder who has a 23 percent share, according to the fiscal earnings last year. Securities firms say that 13 billion won (US$10.82 million) out of 56 billion won (US$46.63 million) dividends was from SK Telecom.
On the other hand, SK Telecom will reduce the facility investment from 2.15 trillion won (US$1.79 billion last year to 2 trillion won (US$1.67 billion) this year. Instead, the company will spend over 1 trillion won (US$832.64 million) to take over CJ Hellovision, the nation's No. 1 cable TV company.