DoCoMo, SK Telecom deal delayed
( 2001-07-30 11:17) (7)
SK Telecom, South Korea's largest mobile carrier, suffered a setback in its efforts to sell off a 14.5 percent stake to Japan's dominant mobile operator NTT DoCoMo Inc, underscoring the gap between the two carriers over the deal.
DoCoMo said on Thursday that it was willing to wait even longer for a stake in SK Telecom, casting a dark cloud over the protracted talks between SK Telecom and the Japanese mobile carrier.
DoCoMo Chief Executive Keiji Tachikawa said he had no choice but to wait since South Korea has yet to finalize its third generation (3G) wireless service licensing.
The Ministry of Information and Communication said it will select a third and final 3G service provider by the end of August. Seoul awarded 3G licenses based on W-CDMA technology, favored by DoCoMo and Nokia of Finland, to SK Telecom and state-run Korea Telecom last December. It is now expected to offer the last 3G license, based on Qualcomm's cdma2000 standard to a consortium led by LG Telecom, the sole bidder.
The DoCoMo CEO's comment, meantime, is interpreted as a sign that the Japanese mobile carrier is reluctant to seal the long-delayed deal, dashing market rumors for a quick conclusion.
Analysts said DoCoMo appears to be delaying the stake deal with SK Telecom over price differences. DoCoMo wants to close the deal based on SK Telecom's current share price, while the Korean mobile carrier demands about 40 percent premium, or 280,000 won a share.
Another factor is that the introduction of 3G services faces a range of obstacles worldwide. Investors are concerned about the huge initial investment for 3G services as well as technical problems. Major service providers are now putting off the target launching date to grapple with such technical and profit-related issues. The Korean government has also expressed its intention to delay the target date for 3G services from May 2002 to no later than the end of 2003.
Given that DoCoMo plans to generate synergistic effects by jointly selling off W-CDMA systems along with SK Telecom, the delay of 3G services is expected to drag the talks between the two carriers further.
In January, SK Group handed over a 14.5 percent stake in SK Telecom, or 12.27 million shares, to offshore investor Signum IX, based in the Cayman Islands. The shares were valued at around 3.8 trillion won.
Under the deal, Signum IX would only pay the price if it can sell the stake to a third party. This is the stake that NTT Docomo is looking at buying.
The contract would be canceled, and the stake returned to SK Telecom if Signum IX doesn't find a third-party strategic partner.
If NTT DoCoMo strikes a deal to buy the stake, it will be SK Telecom's second largest shareholder.
SK Corp, which holds a 19.7 percent stake, is now SK Telecom's largest shareholder.
Local media earlier reported that DoCoMo appears to be closing in on a long-sought stake in SK Telecom but whenever such reports arose, the two carriers denied such speculation and, indeed, the deal has yet to be sealed.
As recently as late June, the Korean media reported DoCoMo may put an end to nearly 18 months of negotiations and make a decision at its shareholders' and board meetings slated for June 26. But such a prediction proved off the mark, again.
DoCoMo has been stepping up its efforts to make inroads in Asia after big investments in the US and Europe last year.
Meantime, SK Corp and SK Global have become jittery over the protracted talks between SK Telecom and DoCoMo. Both companies have long wished to receive a fresh injection of cash from the deal to resolve their loans.
SK Corp has a loan worth 7 trillion won and SK Global is also saddled with 7 trillion won. In particular, SK Global is more desperate than SK Corp as the conclusion of the talks is expected to clear about 90 percent of the company's debt problems.
Despite lingering uncertainty, analysts and industry sources said it will only take some time for the deal to come to a conclusion, saying the two carriers of Korea and Japan are unlikely to scrap the talks.
DoCoMo's primary reason for the stake deal with SK Telecom is the Japanese carrier's plans to secure a foothold in the pan-Asian mobile market, linking Japan, South Korea and China.
For SK Telecom, it wants to make inroads into other Asian markets, particularly China, with the help of DoCoMo's marketing and technological muscle.
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