SK Telecom (SKM)

The company also discussed some aspects of the Chinese telecom shake-up. The recent developments were troublesome for SKM in several ways. First, China Unicom’s CDMA network is being sold to China Telecom. SKM had been positioning for a strategic relationship with C. Unicom and hence, SK has a good-sized stake in them. Second, most Chinese telecom stocks sold off on the announced realignment, which hurts the book value of SKM’s stake. Some analysts broached the topic of a joint venture with China Telecom but management rebuffed such talk as premature and has denied any plans to take a stake in China Telecom.

Originally, the skepticism lay in all the company’s non-domestic ventures. The opportunity with the most potential in my view was S-Fone, the Vietnamese venture. There, management mentioned an upcoming round of 3G licensing as well as nearly 4M subscribers at the end of Q1 2008. Helio is still hemorrhaging money and I wouldn’t expect that to change anytime soon. Profitability was targeted for 2010 but I wouldn’t bet on it. I also am unimpressed by the news that Virgin Mobile USA and SK Telecom are in strategic talks. Any transaction that lowers SK’s exposure to the US market is a plus but as of now, there’s little indication as to whether SKM is looking to increase or reduce US activity.

The hanarotelecom acquisition closed and while there may be some legacy issues with misuse of customer data, management talked about some aspects of the transaction and the benefits it may bring. The obvious benefits are the ability to offer bundled services on their own networks and combined distribution and marketing systems for both entities. But they also mentioned new access to what were previously hanaro-only subscribers so post-acquisition strategy and execution will be important to watch.

SKM is still coping with a shifting competitive and regulatory environment, which is reflected in their operating results as well as the share price. Once again, the conference call was filled with vague generalities about the company’s strategy as Asian management simply have different accountability standards than we are used to.