SK Telecom to Buy Shinsegi After Vodafone Bows Out (Update7)
12/20/99 1:43:00 AM
Source: Bloomberg News
(Rewrites paragraphs 1-5.)
Seoul, Dec. 20 (Bloomberg) -- SK Telecom Co. agreed to buy control of Shinsegi Telecom Co. for about $2.4 billion, extending its dominance in South Korea's mobile phone market after Vodafone AirTouch Plc canceled plans to acquire extra Shinsegi shares.
Quote Snapshot
VOD 47.88 -1.38
Enter symbol:
ú Symbol Lookup
More from CNET Investor
Quotes delayed 20+ minutes
Korea's biggest mobile phone service provider agreed to buy a 23.5 percent stake for 1.069 trillion won ($940 million) from Pohang Iron & Steel Co. after the steelmaker buys the stake from Kolon International Corp. Also, Posco, as the world's biggest steelmaker is known, will sell its own majority 27.7 percent stake in Shinsegi to SK Telecom in exchange for a 6.5 percent stake in SK Telecom.
The move allows SK Telecom to grow through acquisitions in Korea, where there are five mobile phone service providers and the number of mobile phone users has tripled in the past two years to 23 million or half of the population.
``SK Telecom will be able to dominate industry pricing, enhance marketing capability and increase market share through the takeover, becoming the unparalleled power in the Korean telecom industry,' said Douglas Kim, a telecom analyst at ING Baring Securities Co. in Seoul.
SK Telecom Chairman Son Kil Seung declined to disclose whether the company would issue new shares to Posco. Based on SK Telecom's outstanding shares and current price, the Posco stake is worth $1.5 billion. Son said he expects the acquisition to be completed by the end of March.
Son said he expects the alliance with Shinsegi will save 4 trillion won in marketing and other costs. SK Telecom, with 9.98 million subscribers, will extend its market share by about a third when it takes over Shinsegi as mobile phone operators look to develop new services, including wireless data and Internet, to keep their customers in a saturated market.
SK Telecom has a 44 percent market share, followed by KT Freetel Co., the No. 2 mobile phone company, with 18 percent, and Shinsegi with 16 percent.
Vodafone Bows Out
SK Telecom's buyout became possible after Vodafone, the world's largest mobile phone service provider, failed to make an initial payment for a 16.5 percent stake in Shinsegi from Kolon by Dec. 15 after signing an initial agreement in September, said Lee Wha Yong, a Kolon spokesman.
Vodafone officials in Australia refused to comment on why the company bowed out. Vodafone still owns 11.4 percent of Shinsegi. Son said SK Telecom was interested in extending alliance with Vodafone through Shinsegi.
SK Telecom's purchase price suggests the company is paying $1,445 per Shinsegi subscriber. That's less than the $1,866 per subscriber price DDI Corp., Japan's second-largest long-distance company, agreed to pay last week to buy KDD Corp. and IDO Corp. in that nation's largest takeover. Earlier this month, NTT Mobile Communications Network Inc. paid $2,100 per subscriber to buy Hutchison Telephone Co.
Son said his company is still in talks to sell a 7.6 percent stake to an international investor, including NTT DoCoMo, as the firm looks for ways to develop technology. ``We've already agreed on most of the terms for a strategic alliance,' he said.
Taking over Shinsegi will allow SK Telecom to further undermine its smaller rivals. In November, SK Telecom snatched 437,000 of Korea's total 450,000 increase in new users.
``SK is already the most competitive provider and the upside potential from the acquisition is quite huge,' said Kang Shin Woo, who manages $1.2 billion at Hyundai Investment Trust Management Co. ``I'm buying the stock because I already feel the importance and the need of cellular phones' variable functions in my daily life.'
Kang expects the SK Telecom stock to rise as high as 5 million won. SK Telecom shares surged by the daily 15 percent limit in the first minute of trading to a record 3.218 million won.
Until last year, SK Telecom was the only profitable Korean mobile provider. The other four rivals lost money with margins destroyed by aggressive discounting and subsidies for new subscribers.
Shinsegi earned 18.3 billion won in the first six months of this year, reversing a 30.5 billion won loss in the second half of last year. It's the first time Shinsegi has made a profit in five years.
More Mergers
Widening the gap with its rivals will make it easier for SK Telecom to win one of three slots that the government plans to offer for the development of the next-generation mobile phone services, dubbed IMT-2000.
Winners of the IMT-2000 project will be able to jump into the lucrative services of wireless data, picture and Internet at a faster speed. Korea's Internet users already total 7.2 million and the market will grow 30 percent a year, according to Merrill Lynch & Co. estimate.
Still, Korea other mobile phone providers -- KT Freetel, a unit of the nation's biggest phone company, LG Telecom Co. and Hansol PCS -- haven't been sitting still.
KT Freetel has shown interest in smallest rival Hansol. Last month, KT Freetel forged partnerships by selling its combined 9.2 percent stake to Microsoft Corp., the world's biggest software maker, Qualcomm Inc. and Canadian investor Capital Communications CDPQ Inc. for a total of $600 million.
In 1998, Hansol PCS Co. sold a 23.6 percent stake to Bell Canada International Inc. for $160 million, and LG Telecom Co. sold a 23.5 percent stake to British Telecommunications Plc for $390 million.
Posco shares rose 8.2 percent to 132,000 won. Kolon International fell 12 percent to 8,490 won, snapping a 28.4 percent gain in the last seven days.
|
