SEOUL, South Korea-SK Telecom, South Korea’s biggest mobile carrier, may face a serious restriction in its bid to expand its business after its sister unit and largest shareholder SK Corporation came under takeover pressure by a European fund.
Crest Securities, a unit of Monaco-based fund Sovereign Asset Management, recently bought a 14.99-percent stake in SK Corporation, the country’s largest oil refiner, prompting rampant speculation about its motives.
Although Sovereign denied rumors that it is interested in taking over SK Corporation in a thinly veiled attempt to control SK Telecom, things are getting complicated for SK Telecom and the SK Group in connection with the Korean telecom regulations.
SK Telecom is one of the key units of the SK Group, Korea’s third-largest chaebol, or large business conglomerate.
Should Sovereign buy an extra 0.01 percent, SK Corporation would be regarded as a foreign company under the related law. And SK Corporation’s voting rights in SK Telecom would be severely restricted because of laws blocking foreigners from holding a majority of local telecom outfits.
SK Corporation currently holds a 20.85-percent stake in SK Telecom, but if Sovereign uses its 0.01-percent leverage, the foreign ownership of SK Telecom will go up from the current 40.1 percent to 60.95 percent.
All this means SK Corporation will lose its voting rights for the 11.95-percent stake that goes beyond the permissible limit of 49 percent, and more importantly, SK Telecom will be barred from getting a government license for new telecom projects unless the foreign ownership is reduced to the maximum limit.
Such a development is expected to deal a severe blow to SK Telecom as the company is fiercely competing with other Korean telecom service providers like KT Corporation and Hanaro Telecom to secure licenses for 2.3 GHz mobile Internet, digital satellite broadcasting and other new business items.
Local media in Seoul are now pointing out a possibility that Sovereign, brandishing its 0.01-percent option, might force SK Telecom to accept what is called “greenmailing,” a move to get a premium paid on the condition that the fund would terminate a hostile takeover bid.
The 0.01-percent stake, valued at a mere 160 million won (US$131,700) in the stock market, is now sending warnings to SK Telecom executives as the company might be virtually blocked from grabbing new business licenses.
In a statement released here Monday, Sovereign said it has stocked up on SK Corporation shares for a long-term investment, dismissing market speculation that a hostile takeover attempt could be under way. But Sovereign also made clear its plan to overhaul SK Corporation’s business structures, saying it is interested in improving the firm’s corporate governance.
In mid-March, Korea’s prosecutors charged 10 SK Group executives with false accounting over SK Global Company, a trading unit of the conglomerate. SK Corporation owns 38 percent of SK Global, an interlocking stake structure through which the SK Group has controlled its sprawling units including SK Telecom.
SK Global creditors took control of the firm, which admitted to having inflated its 2002 earnings by 1.5 trillion won (US$1.2 billion), marking the nation’s biggest accounting scandal in recent years.
