Telecommunication Giant in the Making

A strategic alliance is in the making between SK Telecom and Japan`s premier provider of mobile phone service, NTT Tokomo.

A source in the SK telecom revealed on July 12, "For the promotion of telecommunication industry, we have entered into a deal with NTT Tokomo. NTT has agreed to purchase 7 trillion won worth of SKTelecom stocks. The shares involved in such a deal would place 15% of total shares in the hands of NTT, making them the dominant share-holder of SKTelecom."

He further added, "The initial negotiations between NTT and SKTelecom have been practically completed at this point and there only remains the final meeting in Seoul for the two parties to sign the deal some time in July."

In the deal, SK which is the major shareholder of SKTelecom with the holdings of 25.7% of the shares (22.89 million shares), it will hand over 6% of its holdings. In addition, SKGlobal will supply 6.52 milion shares (7.74%) and SKMedical will supply 900,000 shares (1.08%).

The price has been fixed at 600,000 won per share which is 65% higher than currently traded value of 360,300 won per share in the market.

In consideration of SK`s having paid a unit purchase price of 78,800 won for its shares, the sale of 6% translates into a gross profit of 2.607 trillion won. For SKGlobal which had paid the purchase price of 130,000 won per share, the expected sales profit will reach 305.9 billion won.

SK plans to divert 3 trillion won of the sales profit toward repayment of its debts and the rest will be applied toward reinvestment purposes.

The two telecommunication giants have also entered into an agreement to cooperate in the research and development of telecommunication technology.

NTT Tokomo is the holder of the W-CDMA technology, an asynchronous branch of the IMT-2000 technology which is being adopted by the European telecommunication companies. NTT Tokomo is also the holder of the "i-mode" technology which is considered by many to be the most lucrative of telecommunication service through the internet. Many industry analysts predict that through placing its managerial and technological resource to full throttle, NTT Tokomo will continue to establish strategic ties with various other telecommunication companies abroad to become the world`s first and foremost provider of telecommunication including the upcoming "vodaphones".

NTT Tokomo and SKTelecom has also revealed that they have recently contacted the mobile phone manufacturer in the United States such as "Voice Stream wireless for possibilities of capital investment and cooperation.