SK Broadband, part of South Korean telco group SK Telecom, has announced it is to merge with its wholly-owned subsidiary Broadband Media.
SK Broadband has also said it will subscribe to the KRW279bn (US$262m) rights issue proposed by Broadband Media,…
SK Broadband, part of South Korean telco group SK Telecom, has announced it is to merge with its wholly-owned subsidiary Broadband Media.
SK Broadband has also said it will subscribe to the KRW279bn (US$262m) rights issue proposed by Broadband Media, according to a statement from ratings agency Moody’s today.
Broadband Media provides Video on Demand (VoD) service, while SK Broadband offers real-time Internet Protocol Television (IPTV) service.
The merger will improve SK Broadband’s operational efficiency by integrating its VoD and real-time service platforms and will also enhance its business integration with its parent company, said the ratings agency’s statement.
“Moody’s believes that SK Broadband will primarily fund the subscription to the rights issue with debt, which will in turn be used to repay debt at Broadband Media,” said Yoshio Takahashi, assistant Vice President and analyst at Moody’s. “Given that we analyse SK Broadband on a fully consolidated basis, the whole transaction will be leverage neutral, although there could be a modest interest saving element due to SK Broadband’s lower cost of funds.”
Improving business ties with its parent is a key focus for SK Broadband. SK Telecom could see an improvement in wireless customer retention, as it will be able to provide a mobile entertainment package via SK Broadband’s IPTV services, according to Moody’s.
“Business integration with SK Telecom has been the key driver for SK Broadband to continue improving its credit profile, as highlighted by its adjusted consolidated debt/EBITDA falling from 3.6x in 2011 to 3.3x, based on the latest 12 months of metrics ending September 2012,” added Takahashi.
SK Broadband has a Baa3 issuer rating from Moody’s, which includes a three-notch rating uplift as a result of its business integration with SK Telecom.
