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SK Telecom, SM sign strategic partnership

July 18,2017
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SK Telecom CEO Park Jung-ho, left, and SM Entertainment founder Lee Soo-man shake hands after inking a strategic partnership at the entertainment company’s headquarters in Samseong-dong, southern Seoul, on Monday. [SK TELECOM]
SK Telecom, the nation’s largest mobile carrier, signed an agreement with Korean entertainment giant SM Entertainment to buy a series of stocks in each other’s company on Monday in hopes of generating a partnership that will meld the former’s information and communications technology with the latter’s entertainment content and services.

SK Telecom boasts expertise in artificial intelligence and media-related technologies while SM Entertainment holds the intellectual property rights of the stars it manages, expertise in content-making and the loyalty of a fan base spread across the world, especially in China and Southeast Asia.

Under the agreement, SK Telecom will buy 65 billion won ($58 million) worth of stock in SM Culture and Contents, a subsidiary of SM. The investment makes the mobile carrier the second largest shareholder of the SM subsidiary with 23.4 percent.

SM Entertainment remains the largest shareholder with 32.8 percent.

In turn, SM Entertainment is investing 40 billion won in iRiver, SK Telecom’s music streaming device maker, to become its second-largest shareholder.

With the increased capital, iRiver will merge with SM’s mobile content producing subsidiary, SM Mobile Communications, and acquire SM Life Design, which makes merchandise related to SM-managed celebrities for Japanese fans.

The iRiver merger will go up for shareholder approval in August and is set to be finalized in October.

The SM Life Design acquisition is expected to be finalized by September.

The two companies expect the collaborative efforts to add momentum to the distribution of Korean entertainment content and expand the scope of derivative products and services like voice-activated speakers featuring K-pop stars and virtual reality concerts.

SM Culture and Contents is also acquiring the advertising business division of SK Telecom’s marketing affiliate, SK Planet, valued at 66 billion won. However, SK will still play a part in making key decisions as the second-largest shareholder of the SM unit.

SM Culture and Contents said it plans to follow the business model of Japan’s largest advertising agency, Dentsu, which participates in the production and distribution of video content in addition to creating ads. What the company does is take investment from companies that want to place their ads right before or after certain content, and the firm does it from the production stage to improve the quality of the ads played.

The separation of SK Planet’s advertising division is scheduled to go up for approval by shareholders at the end of August, and if all goes well, the acquisition will likely be finalized by October. Afterward, SM Culture and Contents plans to enter the ad market in China and Southeast Asia.


BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]