South Korea's largest mobile carrier plans US$5 billion splurge to become next SoftBank

Seoul

SK Telecom, South Korea's largest mobile carrier, wants to shed its staid image and take on a more dynamic role as an investor in tech startups à la SoftBank Group.

Armed with a US$5 billion budget for acquisitions over the next three years, the company is setting out to find the next Coupang - the Korean e-commerce giant whose massive initial public offering (IPO) fuelled SoftBank's record profit last quarter. About US$2 billion of that will come from the proceeds of planned IPOs by five SK Telecom subsidiaries, some of them potentially listing American depositary shares in New York, said the telecommunications firm's senior executive.

"Our interest is very simple: we want our share price to go up. It's very much like the Nasdaq-listed companies," executive vice-president Huh Seok-joon said in the company's first interview after announcing its corporate split-off. "We have done everything we can to improve the shareholder value."

These moves are part of a tectonic shift underway at South Korea's third-largest chaebol, one of the family-controlled conglomerates that dominate the country's economy. Concern over corporate governance - potentially favouring the founding family over shareholders' interests - at giants such as Samsung Electronics and Hyundai Motor has led their stocks to trade at a perennial "Korea discount" relative to international peers.

Among a raft of reforms, SK Telecom's board decided last week to split the 37-year-old business into two separate companies. The traditional mobile and telco business will focus on steady cash flows and dividends, while the tentatively named SKT Investment Co will be dedicated to investment, growth and IPOs.

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Both stocks will be re-listed in November after a one-month hiatus, pending approval by shareholders. The plan also includes a five-to-one stock split to make shares more accessible to the country's influential retail investors, who account for about three quarters of daily turnover.

They are the latest in a series of measures SK Telecom has recently unveiled to boost shareholder returns, including the introduction of a quarterly dividend and cancellation of almost all of its treasury shares.

"Retail investors still find telecoms a boring stock and we are working very hard to make that otherwise," Mr Huh said. "The new company is a platform company similar to Kakao and Naver." Once the split is complete, SK Telecom aims to boost its net asset value by 30 per cent each year to 75 trillion won (S$89 billion) by 2025, from 26 trillion won this year through aggressive investment and spending.

SK Telecom's shift has been cheered by investors, especially foreign institutions who added net 1.5 trillion won worth of SK Telecom shares this year - more than any other Korean stock, showed Korea Exchange data. Shares rose 38 per cent so far this year, peaking at the highest level in about two decades last Friday. That compares with the benchmark Kospi's 14 per cent gain in 2021. On Thursday, the stock was little changed after earlier advancing as much as 1.1 per cent, while the equity benchmark fell 0.5 per cent.

The stock is still about 30 per cent shy from its heyday in 2000 and is trading at just 10 times its earnings, at a time when compatriot mobile platform company Kakao trades at about 70 times its profits, showed Bloomberg data.

The company is not shy about borrowing the blueprint for developing a successful investment arm that its Japanese peer led by Masayoshi Son pioneered. Mr Huh, who is one of five senior executives to join the new investment firm, said SoftBank and SK Telecom's paths "may be the same". Like SoftBank's ownership of chip designer Arm Ltd, SK Telecom also has a foothold in semiconductors, holding the largest share of SK Hynix, one of the world's dominant trio of memory producers. BLOOMBERG