With five IPOs and $5B, SK plans Korea's SoftBank

With a $5 billion budget for acquisitions, South Korea's SK Telecom is setting off to try to be the next SoftBank Group.

SK hopes the world's hunger for all things Korean will stretch beyond K-pop, Samsung mobiles and Hyundai cars to include more Seoul e-commerce giants like Coupang, with its record $4.6 billion IPO in March.

SK Telecom is South Korea's largest carrier, with over 30 million subscribers and nearly 50% national market share, and is part of SK Group, the country's third-largest conglomerate, or chaebol.

Figure 1: Big ambitions: SK Telecom is looking to move beyond operator status, becoming the South Korean SoftBank.
(Source: Ryan Pikkel on Flickr, CC2.0)

The chaebol has 95 member companies.

They include SK Hynix, the world's second-largest memory chipmaker, behind Samsung.

Of the $5 billion, about $2 billion will come from the IPOs of five SK Telecom subsidiaries, possibly facing listings ahead in New York.

The chaebol system, and concerns it raises for corporate governance, has often led Korean companies to trade at a "Korea discount" compared with international peers.

SK Telecom seems determined to try to change this, by splitting the business into a telco business and an investment business SKT Investment, among other reforms.

Seoul food for investors

For starters, SKT Investment will list five subsidiaries on the Korea Exchange.

One Store, a mobile app marketplace backed by Microsoft and expected to fetch a $1.3 valuation, will be first, at the end of 2021.

ADT Caps, a security firm, will follow by next summer.

Content Wavve, a streaming service, and 11 Street, a mobile commerce business, will be in the queue to IPO in the next three years.

The last subsidiary is T-Map Mobility, a mobile platform which has a joint venture with Uber, which is especially fingered for a dual listing in Busan and New York.

SK Telecom's path "may be the same" as Masayoshi Son's SoftBank, says Huh Seok-joon, executive vice president.

SK Telecom has stakes in other members of the chaebol, including a particularly interesting 21% in the Hynix memory chip business, which will join SKT Investment.

Hynix is in the process of seeking regulatory approvals to acquire Intel's storage division for $9 billion.

Along with Hynix, SKT Investment will encompass the five businesses which are to IPO.

Coming under its umbrella too are Dreamus Company, SK Planet, FSK L&S, Incross, NanoEnTek, Sparkplus, SK Telecom CS T1 (an e-sports joint venture with Comcast Spectacor), SK Telecom TMT Investment (which invests in US markets), ID Quantique (a Swiss-based encryption company) and Techmaker (a joint venture with Deutsche Telekom).

Bring your Kore-a game

The company calls it a "horizontal spin-off," and says it will take place on November 1, with the two companies relisting on November 29.

SK Telecom was created in 1984, as Korea Mobile Telecommunications.

Until it was sold off in 1993, it was a subsidiary of the state monopoly telephone operator, Korea Telecom (which continues as KT).

The chaebol SK Group in 1994 became the company's largest shareholder and changed its name to SK Telecom, at which point it joined the chaebol, founded in 1953.

The chaebol is headed by Chey Tae-won, son of the company's founder.

Chey is the country's 14th richest person.

He was convicted in 2013 of embezzling $40 million from SK companies to cover up trading losses and sentenced to four years in prison, but pardoned by the country's president in 2015.

It's precisely to escape governance worries like these, and the resulting "Korea discount," that SK's board is attempting to find a new model.

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— Pádraig Belton, contributing editor special to Light Reading