이 기사는 2022년 02월 18일 08:10 thebell 에 표출된 기사입니다.

South Korea's KT Corp will separate its cloud and internet data center (IDC) business via a distribution in kind to grow it into a leader in the market, a move expected to help lift the mobile carrier’s undervalued stock.

According to the separation plan, which was announced on Tuesday, the new entity, named KT Cloud, will be created as a wholly owned subsidiary of KT on April 1.

KT said it would make a 1.62 trillion won ($1.35 billion) in-kind distribution and a 150 billion won cash injection to purchase 100% of KT Cloud. A distribution in kind is a payment made not in cash but in the form of physical goods or any other financial instrument.

The distribution will be made by transferring real estate, equipment and receivables linked to KT’s cloud and IDC business to the new entity. About 400 employees will move to KT Cloud, which plans to increase its workforce to 700 to 800 later.

KT has decided to separate the business via a distribution in kind, rather than a split off which involves a comprehensive transfer of the relevant assets and liabilities, because most of the company’s assets are used in a shared manner between its telecom and cloud units.

“There are challenges with regard to identifying the company’s assets by business unit,” an official at KT said, adding that the company will only hand over its internet data centers in the metropolitan area to the new entity.

Additionally, KT said it would seek shareholder approval at an annual general meeting in March to revise its articles of association to allow the company to pay dividends in the form of shares in its subsidiaries. This would enable KT’s shareholders to receive shares in KT Cloud in dividend in the future.

The move by KT apparently reflects growing criticism over some publicly-traded South Korean companies that split off their business units as a wholly owned subsidiary and subsequently list their shares on the stock market, such as LG Energy Solution, formerly the electric vehicle battery unit of LG Chem.

This in many cases has hurt the market value of parent companies, sparking the ire of minority shareholders and the attention of politicians including the country’s presidential candidates.

KT has also vowed to make sure to reflect any legal changes regarding a business separation in the future.

While KT’s cloud and IDC business has seen two-digit growth in recent years, it still accounts for a fraction of the company’s total revenue. In 2021, the business unit made revenue of about 456 billion won, roughly 2.5% of KT’s overall revenue of 18.38 trillion won on a non-consolidated basis.

Industry experts expect the business separation to help bolster KT’s undervalued stock. KT trades at a price-to-book ratio of 0.52 times, much lower than around 0.75 times for rivals SK Telecom and LG Uplus.

KT is the country’s only company that offers network, internet data center and cloud services all together. It has recently launched its hyperscale artificial intelligence computing service, which allows users to use cloud-based GPU infrastructure at any time and pay fees on a per use basis. (Reporting by Jang-jun Lee)