SK Telecom creates dedicated IPO team to boost valuation

South Korea’s largest mobile carrier SK Telecom Co. has set up an exclusive team to oversee the initial public offering process for its affiliates, as the company aims to boost its enterprise value via a series of listings once it becomes an intermediate holding company.

The IPO team will operate separately from the finance department and handle the strategy and process for SK Telecom affiliates' listings, such as calculating the valuation and determining the offering size and timeline of each, according to investment banking sources on Feb. 7.

The Korean mobile carrier has been fostering new businesses through its affiliates and plans to maximize its valuation through the growth of non-telecommunication businesses, the trading debuts of which will be essential.

SK Telecom currently operates several non-listed affiliates, including internet provider SK Broadband; digital content provider SK Planet; security service provider ADT Caps; app store operator One Store; mobility service T Map Mobility; e-commerce platform 11Street; and over-the-top service Wavve.

Last September, SK Telecom officially kicked off its long-held plan to list its affiliates when it hired KB Securities, SK Securities and NH Investment & Securities as IPO managers for the app store operator One Store.

In October 2020, SK Telecom's e-commerce platform 11Street made headlines when it entered a strategic partnership with the US-based online retail giant Amazon.com. Industry watchers expect 11Street to utilize its offering of direct overseas purchases to enhance its business competitiveness, which will lead to a rise in its valuation.

The Korean company is also seeking to raise up to 300 billion won ($270 million) to foster its mobility firm, T Map Mobility, as the country’s largest mobility service. The final bid is set to take place this month.

COMPANY RESTRUCTURING TO SPARK SERIES OF IPOS

Under the country’s Monopoly Regulation and Fair Trade Act (MRFTA), a second-tier subsidiary must own a 100% stake in the third-tier subsidiary. Currently, the world's second-largest DRAM maker SK Hynix is a second-tier subsidiary, which makes it difficult for the chipmaker to make equity investments or set up joint ventures to expand its size.

If SK Telecom becomes an intermediate holding company then it would make SK Hynix a first-tier subsidiary, allowing the chipmaker to carry out strategic investments and M&A activities.

Restricting things further, a revised MRFTA is set to take effect at the end of this year, in which newly established holding companies will be required to hold a 30% stake in a listed subsidiary and a 50% in a non-listed subsidiary, up from the current 20% and 40%, respectively. 

Under the revision, SK Telecom would need to increase its shareholdings in SK Hynix from the current 20.1% to 30%, with the additional 9.9% stake estimated to cost around 9.2 trillion won ($8.2 billion) based on its current market value.

For this reason, industry watchers expect SK Telecom to begin its transition soon, to complete it before the the new law takes effect. 

The company is expected to split up into two entities; an investment company and an operating company -- and the investment company is likely to secure an additional stake in the operating company to acquire it as an affiliate. In this case, the investment company is expected to issue new shares to the operating company's shareholders in exchange for shares.

Write to Jin-sung Kim at jskim1028@hankyung.com
Danbee Lee edited this article.