15. Will SK Telecom succeed in global business?

SK telecom, a leading mobile company in Korea, has been trying a lot of global business since 1997. as there is no way to create new value in domestic market. Mongol, Vietnam, UK, America, China etc. are there global market at this time. But the output is not good and the future is still not clear. The Hellio business in America is a good case that global business is quite difficult for the company. We know that telecom business is long term business and this is only possible that when company has enough capital. SK Telecom is going to continue their global business, but they have to find not only the operating services but also many business models.

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Ref.

SK buys bonds in China Unicom

June 22, 2006 ㅡ SK Telecom, Korea's largest mobile service operator, will invest about $1 billion in a Chinese telecom firm in the latest of its recent efforts to go global, the company said yesterday. In a regulatory filing, SK Telecom said that it signed an agreement to purchase $1 billion's worth of convertible bonds in China Unicom, the Hong Kong-listed owner of the mainland-based China Unicom Corp. The firm is the second-largest mobile service provider in China, with approximately 130 million subscribers and a 33.6-percent market share. It has been providing its customers with code division multiple access (CDMA)-type mobile services since 2002. The deal calls for partnership in the CDMA sector, including joint sourcing of mobile handsets and joint development of platforms and applications. The two companies will also share expertise and market information, and provide consulting to each other. The company noted that the partnership would give more opportunities to Korean solution developers and content providers to expand into China. The convertible bonds expire in three years and may be converted to shares one year after issue. If it converts all of the bonds to stock, SK would own 6.6 percent of China Unicom. SK Telecom is not the only company trying to gain a foothold in the Chinese telecom market. As of late last year, the number of mobile phone subscribers in China was 393 million, about 30 percent of China's total population. China's telecom service market, which totaled about 43 trillion won ($45 billion) of sales in 2001, leapt to almost 70 trillion won last year. Britain's Vodaphone currently owns a 3.3 percent stake in China Mobile, the largest Chinese mobile service operator. Spain's Telefonika has a 5 percent stake in China Netcom, the second-largest fixed-line carrier. France Telecom also has "friendly" relationships with China Netcom. SK Telecom said that despite the high growth potential, there are still risks in investing in the Chinese market, one of which is government restrictions. "The most important factor in the bond purchase is that the two companies will have an 18-month strategic alliance relationship in which China Unicom will grant SK Telecom an exclusive status," said Seo Jin-woo, senior vice president of SK Telecom's new business division. "As China joins the World Trade Organization, the maximum for foreign ownership of shares will be increased to 49 percent in December. In a sense, we will be in an advantageous position in buying shares."

by Wohn Dong-hee, Hong Joo-yun <wohn@joongang.co.kr>