The government's review of SK Broadband's plan to split off its data center (DC) business has stepped up. The company aims to accelerate investment in AI infrastructure and expand its business, but some have raised concerns about SKB's long-term competitiveness after the growth business is carved out.

The Ministry of Science and ICT is gathering opinions to decide whether to approve SKB's split, the telecom industry said on Nov. 12. The Korea Communications Commission has also begun reviewing changes to IPTV and comprehensive cable broadcasting permits and is examining the split's impact on the telecoms and broadcasting markets.

Earlier, SK Telecom decided to separate SKB's DC and submarine cable business and establish a new company, SK Horizon. The split ratio is 84 percent for SKB and 16 percent for SK Horizon based on book value of net assets. The surviving SKB will run existing businesses such as broadband internet and IPTV, while SK Horizon will operate data centers and expand AI infrastructure.

SKT has also attracted outside investment in the new company. Global investor Kohlberg Kravis Roberts (KKR) and a consortium of IMM Investment and Stonebridge will invest a total of 3.08 trillion won. Of that, about 1.88 trillion won is payment for SKT's sale of SK Horizon shares it will hold after the split. The remaining 1.2 trillion won will be raised directly by SK Horizon through a new share issue. Once the deal is completed, SKT will hold 51 percent of SK Horizon to retain management control, while outside investors will hold the remaining 49 percent.

Data center growth business separated; SKB faces task of securing new growth engines

Once the split is completed, SKT will oversee data center strategy and global cooperation, while SK Horizon will handle operations and expansion. SK Horizon plans to expand its infrastructure capacity to more than 318 megawatts after 2030, centered on eight DCs currently in operation and new facilities in Ulsan and Guro.

The split is expected to reduce SKB's financial burden. According to SKB's disclosure on its decision to split the company, assets transferred to SK Horizon total 2.06 trillion won, about 30 percent of total assets subject to the split. Of that, liabilities are 1.59 trillion won and capital is 475.8 billion won. The debt ratio under the split plan is 333.2 percent.

By contrast, the surviving SKB has capital of 2.41 trillion won and liabilities of 2.57 trillion won, for a debt ratio of 106.5 percent. With data center-related debt also moving to the new company, SKB's existing financial burden is expected to ease.

Separately from financial restructuring, securing mid- to long-term growth engines remains a task. SKB posted third-quarter revenue of 1.17 trillion won and operating profit of 134.7 billion won this year, up 2.6 percent and 51 percent, respectively, from a year earlier. Results improved, but with the high-growth DC business split out, SKB must secure new revenue sources centered on its existing fixed-line and media businesses.

There is also opposition within the company. SKB's labor union notified management on Nov. 5 that talks had broken down over this year's wage negotiations and bargaining related to the data center spinoff. The union said it held 15 working-level sessions since the first meeting in July and also held representative talks between the chief executive and the union chairman, but failed to reach agreement.

The union argued that the company has failed to present a replacement growth business while separating the DC business it has fostered for more than 20 years. It also said that while SKT secures about 1.88 trillion won in proceeds from the sale of existing shares, it is passive about future growth plans for SKB and compensation for members.

Government licensing review begins; broadcasting stability and investment capacity examined

In the government review, stability of existing businesses after the split is expected to be a key issue. The ministry will gather opinions from various sectors of society through Nov. 30. Under the Telecommunications Business Act, it will review business operations and financial and technical capabilities, the impact on competition among key telecom operators, user protection and the public interest.

The communications commission on Oct. 23 approved a basic plan to review permit changes for IPTV and comprehensive cable broadcasting business following SKB's corporate split. It plans to form a review committee of seven experts in broadcasting and media, law, technology and accounting to examine the ability to carry out broadcasting operations after the split and whether public responsibility will be maintained.

The union said it will step up its struggle against SKB and SKT management and pursue necessary administrative steps such as applying for mediation by the National Labor Relations Commission. It also said it will convey its position during the licensing review process by the ministry and the communications commission.

SKB said that after the split, a reduced burden from large-scale DC investment will allow it to maintain competitiveness in its fixed-line, media and enterprise businesses. SKB said it would "continue to negotiate in good faith with the union" and "continue to strive to secure mid- to long-term growth engines."