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SK Telecom to spin off its non-telecoms companies

Korean ICT group SKT has decided it’s too diversified, so will be creating a new company to house stuff like SK Hynix and ADT Caps.

It’s calling the move a ‘horizontal spin-off’, whatever that means. The whole thought process still seems to be in a fairly early stage, as indicated by the rather vague diagram below. The long and short of it is that SKT has a bunch of businesses that aren’t directly concerned with connectivity, so they might do better having their own corporate identity.

Strangely omitted from the diagram is SKT’s main business as an MNO, which apparently accounts for almost half of the South Korean 5G market. That and the broadband bit will be the ‘surviving’ (something may have been lost in translation there) company, which is being tentatively labelled the AI & Digital Infra Company. The emphasis on AI seems designed to maintain its position as a 5G technology leader.

SK Hynix makes all types of memory chips as well as CMOS image sensors. It’s a public company with SKT owning 20% of its shares and is apparently the second biggest company on the Korean stock exchange by market cap. ADT is a domestic security company of which SKT owns 55%, with Macquarie having the rest. They will be grouped together with whatever else isn’t considered telecomsy enough into something provisionally called the ICT Investment Company.

The announcement features the usual blurb about increasing shareholder value, much like Dell’s recent decision to fully spin-off VMWare. Isn’t it funny how both mergers and spin-offs both increase shareholder value? In general the parent companies presumably want to free up some cash for investment or paying down debt or whatever, but feel compelled to dress it up as a more profound strategic move than it actually is.

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