Phone
Unicom, Chinas second-largest provider of mobile-phone service, plans to buy back 899.7 million shares for HK$10 billion ($1.3 billion) from SK Telecom, the Beijing-based carrier said in statement today. The company will pay HK$11.105 a share, 1.4 percent lower than the closing price in Hong Kong trading on Sept. 25.
Telefonica, which replaced SK Telecom as Unicoms biggest overseas investor last year, said this month it would raise its shareholdings by 50 percent. For Unicom, the revamp of the domestic telecommunications industry made the strategic alliance forged in 2006 with the South Korean carrier “no longer relevant,” according to Mirae Asset Management analyst Daniel Baker.
“As Unicom aligns itself more closely with Telefonica, this has made it more likely for SK Telecom to seek an exit,” said Baker, who rates Unicom shares “reduce.”
The SK Telecom holding, a 3.8 percent stake, will be canceled after the repurchase, according to the statement.
Shares Fell
Unicom shares fell 1.9 percent to HK$11.04 as of 11:43 a.m. in Hong Kong trading. The stock ended trading at HK$11.26 on Sept. 25. SK Telecom rose 2.6 percent to 175,500 won in Seoul trading, compared with a 1.2 drop in the countrys benchmark Kospi index.
SK Telecom, South Koreas biggest wireless carrier, bought $1 billion of Unicom bonds in 2006, which it converted into stock a year later, as the two companies pledged to forge an alliance on mobile-phone services based on CDMA, code-division multiple access, technology. The Chinese company was awarded one of three permits by the government in January to offer 3G services, which allow faster Web browsing and music downloads on mobile phones.
South Koreas largest wireless carrier, Unicoms third- biggest shareholder, will generate investment gains of about HK$2.2 billion from the sale, according to Bloomberg calculations.
Growth Strategy
SK Telecom said in a filing the sale reflects changes in the companys growth strategy and its plans to increase the liquidity of its assets. Both SK and Unicom said they will continue to be partners, without elaborating.
In October 2008, Unicom bought China Netcom Group Corp., the dominant fixed-line carrier in northern China, after selling its CDMA mobile-phone division to China Telecom Corp. as the government reorganized the domestic phone industry.
“SK Telecom seems to have determined that its going to be difficult to assume management rights of China Unicom,” said Nathan Byun, an analyst at Daewoo Securities Co.