[News Focus] SKT may face difficulty financing Hynix acquisition

Telecom giant also needs huge investment for new radio spectrum and platform division spin-off


Few raised doubts over SKT’s financing when the nation’s top mobile carrier submitted its letter of intent early July to acquire a 15 percent stake of the world’s second biggest computer memory chipmaker Hynix.

The acquisition of the shares was expected to cost about 2-3 trillion won and SKT has been the “cash cow” for SK Group, recording about 112 trillion won in total sales last year and 1.2 trillion won in net profit almost every year.

But SKT’s successful winning of a coveted wireless broadband spectrum and its spin-off plan may hamper its financing to acquire the semiconductor company, market analysts said.

Early this week, SKT acquired the 20-megahertz band of the 1.8 gigahertz range for 995 billion won ($926.67 million) in the country’s first wireless broadband spectrum auction after its rival KT Corp. withdrew from the competition.

The telecom giant also plans to spin off its platform division in October, a project which analysts said will require at least 500 billion won in an initial investment.

At least 3 trillion won ($2.78 billion) is estimated to be needed for the Hynix acquisition itself and 2 to 3 trillion won is required additionally for facility investment every year, mostly because it is a business that needs steady investment to fuel sustainable growth, according to the analysts.

“The yearly facility investment was the core reason behind other firms’ failure in previous Hynix acquisition attempts,” an industry source said asking not to be named.

SKT’s spin-off plan may also demand a huge investment from the company.

Choi Yoon-mi, an analyst at Mirae Asset Securities, said, “It will need the funding for the platform business because it is deemed to be a project that is unprofitable.”

Park Jong-soo, a senior analyst at Hanwha Securities, said the spin-off of the firm’s platform division will require at least 500 billion won since the separated company will need to launch new projects with the funding.

“SKT’s cash and short-term liabilities amount to less than 2 trillion won and 500 billion won out of that sum will be poured into the platform business,” he said.

“At least, a few billion won will be additionally needed in working fund. This means that more than 2 trillion won must be financed in debt to take over Hynix for 3 trillion won,” he said.

But SKT officials are confident of acquiring Hynix.

They said the acquisition of the global chipmaker is an inevitable choice for the company because it is in need of a future growth engine to reach overseas markets. The domestic market is already saturated with over half the population subscribed to SKT services.

In the bidding competition, SKT’s only rival is shipbuilding giant STX Group, which is reportedly seeking to draw investment from the Middle East.

The preferred bidder for Hynix is expected to be picked in October.

By Cho Ji-hyun (sharon@heraldcorp.com)