By Kim Yoo-chul
Leading research houses said Friday that SK Telecom’s decision to buy back 523 billion won worth of its own shares will significantly help boost shareholder value.
“The buyback amount was higher than expected. This is a very positive factor to shareholders,” HSBC Securities said in a note to clients.
SK Telecom, the country’s largest telecom carrier, plans to buy back 2.02 million of its own shares. HSBC maintained its “buy” rating on SK Telecom and 375,000 won as its target on the SK Group’s telecommunications affiliate.
KDB Daewoo Securities said SK Telecom’s decision to buy the group’s content affiliate of SK Communications will help it receive a re-rating on the telco’s share price.
“We understand that the announced buyback plan is aimed at boosting shareholder value as the amount was higher than earlier planned. SK Telecom planned to buy back 400 billion won worth of its own shares,” Moon Ji-hyun at KDB said.
SK Telecom allowed shareholders of SK Broadband, which the carrier acquired on June 9, to get its shares in a fixed swap ratio. As SK Telecom used its own shares for the process, the company own shares was decreased to 8.11 million as of June, from 9.8 million.
“SK Telecom stocks were undervalued compared to those by other global carriers. As the carrier is expected to post more profits in the second half from the first half; therefore, the share buyback plan is positive,” Moon said.
Choi Kwan-soon at SK Securities said the latest deal is a “win-win” for SK Telecom and SK Communications, as SK Telecom can diversify its portfolio in content by using SK Communications’ content patents, while the latter will receive more funding from SK Telecom to develop high-quality mobile content.
Under the SK Telecom’s decision, SK Planet will acquire SK Communications due to regulatory issues.
SK Planet owns shares in SK Communications and SK Telecom is the biggest shareholder of SK Planet. According to regulations by the country’s anti-trust agency, SK Telecom cannot directly own SK Communications.