(Korean) Telecom Faces Quandary in Foreign Investment
By Kim Deok-hyun
Staff Reporter
The foreign investment outlook for domestic telecommunication companies is looking bleak amid a synchronized global recession and U.S. strikes against terrorists in Afghanistan.
State-run telephone giant Korea Telecom is in negotiations with the U.S. software giant Microsoft, to sell its five percent of government-owned shares and 10 percent of new shares, as part of its privatization process.
In step with a visit here of Microsoft Chairman Bill Gates tomorrow, the company expected a visible result of their prolonged talks, but price differences and unfriendly market conditions are likely to delay the deal.
``Consequently, the outlook for the deal is not so bright,'' said a senior official at Korea Telecom on condition of anonymity. However, he didn't rule out the possibility of an early settlement.
The company will conduct a rights issue involving the sale of new shares equivalent to 10 percent of the existing share capital. These, plus another five percent stake held by the government, will be made available to foreigners.
Of the remaining 33.4 percent held by the government, Korea Telecom plans to sell 16 percent in the form of depositary receipts to foreign investors and 17.4 percent to local investors by the end of June 2002 to complete its privatization.
On Oct. 12, the British economic daily Financial Times reported that talks between NTT DoCoMo and SK Telecom, for the Japanese mobile phone operator to take a minority stake in South Korea's biggest mobile carrier, are on the verge of collapse.
The report said NTT DoCoMo has also been disturbed by an apparent reluctance within SK Telecom towards an early roll-out of wideband-CDMA, the third-generation mobile phone standard adopted by the Japanese company and many European operators. Citing some close to the talks, the newspaper said the deal is 99.9 percent off.
The two sides have been in discussion for a strategic partnership and investment, including the sale of a 14.5 percent stake held by SK Telecom and SK Global.
The two companies are negotiating the sale of the stake, which will make the Japanese firm the second largest shareholder in SK Telecom.
SK Telecom wants to strengthen ties with foreign firms as part of its campaign to become a global operator.
Though the two sides immediately denounced the report, calling it groundless, analysts said the report is evidence that the negotiations are in a difficult situation.
LG Telecom, which won the third and last 3G business license last August after SK Telecom and Korea Telecom, has also struggled to attract investment.
After a break-off on investment negotiations with Canadian mobile operator Telecommunications International Wireless (TIW), the company is now in search of new investors, but it admits to a hardship in attracting overseas capital.
In addition, the company indefinitely delayed its right issue offering of 539.6 billion won, scheduled last week, blaming a stock market that was already beginning to run out of downward momentum.
As a result, the company is expected to face a financial headache in building its 3G infrastructure and network.
The second largest high-speed Internet operator, Hanaro Telecom, and fixed-line telephone and Internet service company Dacom also faced a dilemma in raising capital from foreign investors for their new investment plans, amid uncertainty over the economic and security impact of the U.S.- led bombardment of Afghanistan.
kdh@koreatimes.co.kr
ÀԷ½ð£ 2001/10/14 17:48
korealink.co.kr
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(Korean) Telecom companies face obstacles in foreign stake deal
Korea's telecom service providers face a string of obstacles in pulling off a stake deal with potential foreign partners amid the global economic slowdown and the U.S. showdown with terrorists in the Middle East.
The country's major telecom carriers have long pushed for investment deals with foreign companies to secure fresh funding for new business projects but the fast deteriorating economic conditions, coupled with the U.S. military action in Afghanistan, have put a brake on such efforts.
The telecom sector worldwide has been in the doldrums, hurt by dwindling new networking investment and the bursting of the high-tech bubbles on major stock markets, even before the U.S. came under the worst-ever terrorist attacks in New York and Washington a month ago.
SK Telecom, the country's largest mobile carrier, and NTT DoCoMo have been engaged in a prolonged negotiation for a stake deal, and yet progress seems to be nowhere in sight.
Last week, foreign newspapers reported that SK Telecom's deal with NTT DoCoMo is in danger of breaking down, sparking denials from both companies immediately. But the talks lasted for one year and two months, without any tangible results, suggesting that a quick breakthrough is unlikely.
SK Telecom had planned to hand over its 14.5 percent stake (12.92 million shares) currently owned by SK Corp. and SK Global to NTT DoCoMo as part of efforts to expand its influence in the Asia-Pacific region at large and in China in particular. But SK Telecom's share price has been almost halved since the talks started with NTT DoCoMo, making it tricky for two wireless giants to set the pricing for the deal.
Analysts said the delay or failure of stake investment talks between Korean telecom companies and foreign partners could have an adverse impact on third-generation (3G) mobile service implementation.
Worse still, telecom systems and handsets development are in for a bumpy ride due to the stalled stake deals, casting a cloud over the info-tech industry in Korea.
State-run Korea Teelcom is in talks with Microsoft Corp., the global software giant, to sell part of its stake under the privatization plans.
Korea Telecom plans to sell off a total of 15 percent in its stake (including new share offerings) to foreign partners through strategic alliance deals.
Although Korea Telecom officials denied it's in advanced talks with Microsoft, speculation ran high that it is trying to pull off a partnership deal with the software giant.
Bill Gates, chairman and chief software architect of Microsoft, is scheduled to visit Korea tomorrow, offering the possibility that Korea Telecom and Microsoft might finalize the deal during Gates's stay here.
Korea Telecom executives, however, said that the talks with Microsoft will confront a series of challenges such as the tension in the Middle East and the worsening economic conditions worldwide.
Microsoft, meantime, is rumored to implement its ".Net" project in Korea as a testing ground in partnership with Korea Telecom, which controls key telecom infrastructure here.
But Korea Telecom is reluctant to broaden the tie-up to such territory, stopping short of promoting Microsoft's new operating system Windows XP, people familiar with the matter said.
LG Telecom, the country's smallest mobile carrier, is also searching for its foreign partners after its talks with TIW of Canada fell apart.
LG Telecom grabbed the last and third 3G mobile service license based on Qualcomm's cdma2000 technology in August and planned to issue 539.6 billion won in rights this month to secure funds for its 3G network investment.
But the company scrapped the plan last week, opting for an indefinite delay due to the weakness of its share price. Unless the stock market rebounds and its share price surges to a reasonable level, LG Telecom is unlikely to push for a rights offering, delaying its 3G service implementation further.
Hanaro Telecom Inc., the country's second largest broadband provider, is also chained to the stalled privatization of Powercomm, a cable-based telecom infrastructure operator.
Hanaro was in talks with potential foreign partners to secure new funding on the condition that it would take over Powercomm, a unit of Korea Electric Power Corp. (KEPCO).
The sell-off of Powercomm is part of the government's broad push to privatize major state-run companies. The sale of Powercomm is trapped in a complicated dispute between KEPCO and the government over the business coverage of the cable network service operator.
"Foreign partners clearly set the take-over of Powercomm as the key condition for stake deals with Hanaro, and as long as the sell-off of Powercomm is delayed, we are also unable to proceed our stake deals," a Hanaro official said.
The U.S. military retaliation in Afghanistan to hunt down the suspected terrorist Osama bin Laden is expected to discourage major global companies from expanding investment and signing new partnerships, posing challenges to Korean telecom firms.
(insight@koreaherald.co.kr By Yang Sung-jin Staff reporter
2001.10.15
koreaherald.co.kr |
