이 기사는 2021년 11월 10일 08시09분 thebell에 표출된 기사입니다

South Korea’s SK Telecom has poured its cash reserves into its non-telecom spin-off SK Square while taking on debts to help the new entity get off to a good start.

SK Telecom has finished a process to separate its non-telecom SK Square by filing an application for registration with the relevant authorities on November 2. The follow-up process will also be completed when the new entity is re-listed on November 29.

The surviving SK Telecom will focus on artificial intelligence (AI) and digital infrastructure, in addition to its current mobile and network businesses. SK Square will serve as an investment firm of SK Group, overseeing chip and ICT operations.

SK Telecom has handed over 387.9 billion won ($329 million), or 66% of its cash reserves totaling 590 billion won as of the end of March this year, to SK Square. SK Telecom's remaining cash reserves amount to about 200 billion won.

In contrast, SK Telecom transferred only 97.1 billion won worth of debts to SK Square among its total debts of 14.6 trillion won. Debts worth 14.5 trillion won will remain with SK Telecom. In case of assets, SK Telecom has given assets worth 6.93 trillion won out of total 31.79 trillion won to SK Square, most of which are stakes in its subsidiaries including SK Hynix and ONE store.

SK Telecom’s debt ratio will deteriorate from 84.9% to 138.9%, while SK Square will kick off as a financially healthy company, with a debt ratio of only 1.4%. Under the Commercial Act, the surviving company, SK Telecom, and the new entity, SK Square, are responsible for repaying the debts before the spin-off, but the primary responsibility lies with SK Telecom.

The reason the spin-off was designed in favor of SK Square is because it will be the investment entity that will serve as an intermediate holding company of the group.

The telecommunications business run by SK Telecom is a typical subscription business, which steadily generates cash revenue. SK Telecom’s financial statement will temporarily deteriorate after the spin-off, but the company can still raise funds whenever necessary thanks to its strong cash-generating ability and positive credit ratings.

Unlike SK Telecom, SK Square does not run its own business and depends on dividend income from its subsidiaries. It hasn’t received a credit rating yet and hasn’t issued a corporate bond either. Some of its subsidiaries plan to go public, but their listing plans have not been specified yet.

“Before the spin-off, SK Telecom generated almost all of its revenue from the wired and wireless businesses, so the spin-off is likely to have a limited impact on its profit-generating ability and cash flow,” said an official at one credit rating agency. “SK Telecom’s burden to invest in the non-telecom business will be eased because it will now be SK Square’s job to develop new businesses and set up investment strategies.” (Reporting by Choong-hee Won)