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Press Release
Good morning and good evening. I am Song Hyun Jong, Head of IR Office at SK Telecom. Thank you for joining us at our Conference Call today despite your busy schedule and such a short notice. You must be aware of the facts through the disclosures, but we would like to take this opportunity to elaborate on SK Telecom’s acquisition of China Unicom’s Convertible Bonds and the strategic alliance, on which we gained BOD approval last night. SKT has decided to purchase 3 year maturity CBs in the amount of 1 billion dollars to be issued by China Unicom, in order to lay the groundwork to enter the world’s biggest mobile communications market and to gain an upper-hand ahead of China’s market opening under the WTO regime.
The conversion price for CB is 8.63 HKD, 25% premium against reference share prices. Once the bonds are converted, SKT’s shareholding will stand at 6.67% As you are well aware, China has world’s largest number of mobile subscribers and an attractive market where stable and continuous growth is expected. Also SKT has had a continuous interest and have prepared to make forays into the market for a long time, due to its geographical proximity and cultural similarities. Despite the uncertainties, such as 3G licenses and restructuring, we decided to enter China’s mobile communications market at this time because we believe once the uncertainties are removed, there will be tougher competition and higher cost to market entry. We have decided to make the investment in the form of purchasing CBs because as you would know, convertible bonds have a merit in that in protects against various downside risk that could arise from restructuring process of the telecom market and at the same time we can ensure exit flexibility.
Therefore we approached the CB purchase through CUHK, which is a listed company in Hong Kong, who owns 100% stake in CUCL, the Chinese operator, to factor in CB stability and China’s regulation on Telco investment. The purchase of the CB is not merely a capital investment. It is the first step towards building a win-win partnership through strategic alliance between SK Telecom and China Unicom. Both companies have agreed to alliances and collaborations in 6 areas including handset, VAS and platform. We expect SKT’s core competencies to transfer into China and contribute to enhancing investment value. Meanwhile, this deal will not bring any changes to our year 2006, 2007 shareholder return policy which we announced early this year.
SKT will continue to focus on maintaining the balance between shareholder return and growth investment with the cash flow generated from our businesses. This has been the background on CB purchase and strategic alliance with China Unicom. I hope you can understand that we weren’t able to inform you beforehand as it involved a counter party to an agreement. I will be more than happy to give you the details during the Q&A session.
The conversion price for CB is 8.63 HKD, 25% premium against reference share prices. Once the bonds are converted, SKT’s shareholding will stand at 6.67% As you are well aware, China has world’s largest number of mobile subscribers and an attractive market where stable and continuous growth is expected. Also SKT has had a continuous interest and have prepared to make forays into the market for a long time, due to its geographical proximity and cultural similarities. Despite the uncertainties, such as 3G licenses and restructuring, we decided to enter China’s mobile communications market at this time because we believe once the uncertainties are removed, there will be tougher competition and higher cost to market entry. We have decided to make the investment in the form of purchasing CBs because as you would know, convertible bonds have a merit in that in protects against various downside risk that could arise from restructuring process of the telecom market and at the same time we can ensure exit flexibility.
Therefore we approached the CB purchase through CUHK, which is a listed company in Hong Kong, who owns 100% stake in CUCL, the Chinese operator, to factor in CB stability and China’s regulation on Telco investment. The purchase of the CB is not merely a capital investment. It is the first step towards building a win-win partnership through strategic alliance between SK Telecom and China Unicom. Both companies have agreed to alliances and collaborations in 6 areas including handset, VAS and platform. We expect SKT’s core competencies to transfer into China and contribute to enhancing investment value. Meanwhile, this deal will not bring any changes to our year 2006, 2007 shareholder return policy which we announced early this year.
SKT will continue to focus on maintaining the balance between shareholder return and growth investment with the cash flow generated from our businesses. This has been the background on CB purchase and strategic alliance with China Unicom. I hope you can understand that we weren’t able to inform you beforehand as it involved a counter party to an agreement. I will be more than happy to give you the details during the Q&A session.