After cutting its artificial intelligence (AI) business target revenue by more than half due to the fallout from a hacking incident, SK Telecom is seeking a way forward with a two-track strategy of "selling subsidiaries" and "integrating organizations." The strategy appears to be to build fast decision-making and execution through in-house AI organization integration, and to raise funds for AI investment by selling noncore business subsidiaries.
According to the telecommunications industry on the 17th, Yang Maeng-seok, CEO of SK Stoa, a subsidiary of SK Telecom, said in an in-house notice on the 15th, "We will soon begin the sale process." SK Stoa is the No. 1 T-commerce data home shopping company in Korea. A telecommunications industry official said, "It seems SK Telecom needs to secure ammunition for AI infrastructure investment due to the changed management environment after the hacking incident, which is why it is moving to sell a prime subsidiary." In the second quarter, SK Telecom's operating profit was 338.3 billion won, down 37% from a year earlier, taking a direct hit from the hacking fallout that occurred in Apr.
As a result, at the end of Sep., SK Telecom announced it would cut its 2030 AI business revenue target to 5 trillion won. That is more than half of the 2030 AI business revenue target (10.5 trillion won) it disclosed last year. Analysts say the hacking incident has hobbled the company, leading to expectations that various infrastructure investments for SK Telecom's AI business would be delayed. There is also talk inside and outside the industry that SK Telecom may move to sell subsidiaries in a package deal or dispose of asset to secure funds for AI investment. According to the industry, SK Telecom is also reportedly considering selling its Pangyo office building, which it co-owns with SK Planet, a subsidiary of SK Square.
Some expect that to raise funds for AI investment, the company may spin off the wireline business institutional sector and the AI data center business institutional sector from its subsidiary SK Broadband through a physical division and then pursue an initial public offering (IPO) of the AI data center business institutional sector. In the first half of this year, SK Telecom completed the process of making SK Broadband a wholly owned subsidiary by acquiring equity from Taekwang Group and Mirae Asset.
SK Telecom has said it will invest 5 trillion won in its AI business over the next five years. According to the industry, 3.4 trillion won of that is expected to be spent as the expense to build an AI data center slated for Ulsan in partnership with Amazon Web Services (AWS). In the second quarter, SK Telecom's cash and cash equivalents (including short-term financial products, separate basis) stood at 875.4 billion won, down 38.2% from the first quarter (1.4185 trillion won). This is why the need to raise funds through subsidiary sales or subsidiary IPOs has recently come to the fore.
Amid this, SK Telecom also plans to carry out an organizational reshuffle at the end of this month to integrate its AI units. It will launch company organizations responsible for ▲ adot (A.) service ▲ A. Biz service for corporate clients ▲ AIDC (data center) business ▲ global AI alliances and investment as an AI in-house company (CIC) structure. The industry view is that the company hastened the integration to enable quick decision-making by having Ryu Young-sang, president of SK Telecom, concurrently serve as head of the AI CIC.
A telecommunications industry official said, "Enabling swift decision-making on the AI business and speeding up execution is as important as securing funds for AI investment," adding, "It seems SK Telecom is making an all-out effort to overcome the hacking crisis and accelerate its AI transition." The official added, "There is even talk inside and outside the industry of the possibility that President Ryu Young-sang will remain in his post to expedite the AI push." On the 1st of this month, Ryu met with OpenAI CEO Sam Altman, who visited Korea, to discuss cooperation between the two companies on AI.
Meanwhile, in Jan., SK Telecom sold a 70% equity stake in its grandchild company SK M&S for 58.5 billion won. In Feb., it sold a 50% equity stake in its subsidiary F&U Credit Information and sold SK Comms. The sale price was not disclosed. SK Telecom currently has SK Broadband, SK Telink, PS&M, and SK Stoa as subsidiaries.