Subsidiaries Pushing for IPOs
The author is an analyst of KB Securities. He can be reached at joonsop.analyst@kbfg.com. -- Ed.
Details of planned spin-off announced on Jun 10
— SK telecom (SKT) on Jun 10 revealed details of its planned spin-off (mainstay telecom business vs. intermediary holding company), first announced on Apr 14.
— The spin-off distribution ratio for the surviving company (e.g., telecom business, SK broadband, etc.) vs. the new entity (intermediary holding company) has been set at 0.6074:0.3926.
— The surviving company, engaged mainly in the fixed-line/wireless telecom business, will be focusing on expanding into such new-growth areas as AI, subscription marketing, and data centers, while the new entity will be focusing on business areas of investment interest (i.e., semiconductor, new ICT)
— Following the spin-off, the new entity (intermediary holding company) will have 16 subsidiaries under its roof, including SK hynix, 11street, Tmap Mobility, ONE Store, Waave, Dreamus Company, SK planet, FSK L&S, Incross, NanoEnTek, Sparkplus, SK Telecom CST1 (e-sports company, with SK telecom and Comcast as the largest and second-largest shareholders), SK Telecom TMT Investment (SK telecom’s U.S.-based investment company; a JV with Sinclair Broadcast Group), ID Quantique (a Switzerland-based quantum-safe cryptography firm), and Techmaker (a JV with Deutsche Telekom).
— Meanwhile, in a bid to give opportunity to more investors, SKT, prior to the spin-off, will be carrying out a stock split (ratio of 1:5), which would increase the total number of shares from 72.0mn to 360mn (218.83mn for the surviving company and 141.47mn for the new entity).
Spin-off to lead to revaluation of subsidiaries in both mainstay and new businesses
— We believe that the surviving company would have greater room for dividend payouts thanks to its cash-generative businesses (i.e., wireless telecom, SK broadband). Of SK telecom’s consolidated operating cash flows of KRW5.8tn in 2020, the wireless telecom business accounted for KRW4.4tn.
— Meanwhile, a slew of subsidiaries under the new entity (intermediary holding company) have been known to be pushing for IPOs, which should lead to revaluation.
