Interesting Statement From SBC>
SBC Plans to Sell Its 7.8% Stake in Shinsegi Telecom (Update2)
SBC Plans to Sell Its 7.8% Stake in Shinsegi Telecom (Update2) (Adds analyst comments in 12th
paragraph, Posco share price)
Seoul, March 29 (Bloomberg) -- SBC Communications Inc., the second-largest local phone
company in the U.S., said it plans to sell its 7.82 percent stake in Korean mobile phone operator
Shinsegi Telecom because its prospects for securing management control of the company are
fading. ''We waited for five years, and we're pessimistic there will be a chance,'' said Hwang
Dong Yeop, general manager of SBC Communications in Seoul.
SBC originally spent 39 billion won ($33 million) to take a stake in the unlisted company, said
Shinsegi spokesman Cho Sung Won. Cho said SBC's announcement came as a surprise and
without prior consultation with other shareholders.
Analysts expect SBC to sell its stake for as much as 150 billion won -- almost four times its original
investment -- based on the pricing of another transaction in the industry late last year. In October,
British Telecommunications Plc, the U.K.'s leading telephone company, bought a 23.5 percent
stake in LG Telecom Co. of Korea for about 230 million won, or about 17,000 won per share.
Criticism
SBC's move to dump its investment coincides with growing U.S. pressure to open South Korea's
markets.
While visiting Seoul on Friday, U.S. Commerce Secretary William Daley criticized the Korean
government for hindering U.S. business in the country, citing the case of a U.S. company barred
from bidding on a contract for elevators at a $6 billion airport project in Inchon.
SBC said it lost interest in Shinsegi after the government postponed plans to raise the cap on
foreign ownership of telecommunications companies to 49 percent from 33 percent, and because
of the reluctance of state-controlled Pohang Iron & Steel Co., the largest investor in Shinsegi, to
sell its 20.55 percent stake.
SBC originally hoped to buy Shinsegi shares from Posco, as the steel company is known, and from
Kolon Group, which owns 19.18 percent.
Posco now appears to be the most likely buyer of SBC's stake. Under an agreement, Shinsegi's
two biggest shareholders have the right of first refusal if SBC's stake goes on sale. ''Posco is
strongly committed to nurture Shinsegi Telecom as one of its core businesses,'' said Moon Gwoan
Gug, a Posco spokesman. ''We're not going to hesitate to take the necessary steps to make that
happen.''
Analysts said Kolon Group has too much debt to contemplate increasing its stake in Shinsegi.
''Shinsegi's future seems to lie in the hands of Posco and Kolon now,'' said Suh Yong Won, a
telecommunications analyst at Samsung Securities Co.
Shinsegi's other shareholders include U.S. wireless communications operator AirTouch
Communications Inc., with 10.64 percent and telecommunications equipment maker Qualcomm
Inc., with 1.97 percent.
Shinsegi ranks third by subscriber base among the five mobile phone service providers in the
highly competitive Korean market. The number of cell phone users almost doubled last year
despite the country's worst recession in five decades, and one in almost every three Koreans now
totes a mobile phone.
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