OREANDA-NEWS. Fitch Ratings says SK Telecom Co., Ltd.'s (SKT; A-/Stable) proposed acquisition of minorities' shares in SK Broadband Co., Ltd. (SKB; BBB+/Stable) will not affect SKT's rating. The acquisition may strengthen the ties between SKT and SKB, but we see no immediate rating impact on SKB.

Fitch believes SKT's credit profile will remain in line with its current rating level as the company will exchange its treasury shares for SKB shares in a transaction worth about KRW706bn. Our financial analysis of SKT already fully consolidates SKB because SKT already owns 50.56% in SKB, and has management control over the latter, and the two companies have strategic and operational ties.

Fitch believes the acquisition could be positive for SKB as full ownership by SKT could strengthen the operational linkages with its parent. For example, SKT could have more flexibility in increasing investments in SKB's fixed-line network with the absence of minority shareholders. SKB's fixed-line service is of great importance to SKT's market position, particularly with respect to its ability to compete with other integrated operators such as KT Corporation (A-/Stable) and LG Uplus Corporation.

SKB's fixed-line network has also become increasingly important to SKT's wireless operation in coping with the rapidly rising data traffic due to smart phone penetration and a nationwide 4G network.

Nevertheless, SKB's top-down rating - one notch below SKT - already reflects our view that the operational and strategic linkages between the two are strong, as demonstrated by SKT's management control of SKB, the strategic importance of SKB to SKT and their integrated product offerings. We understand that SKB will continue to obtain its own funding, and we may upgrade its rating if there is evidence of improved operational and strategic linkages with SKT to warrant an equalisation of the rating. In the meantime, we believe the acquisition will have no immediate rating impact on SKB.

On 20 March 2015, SKT announced that it will acquire the 49.44% of SKB it does not already own via a share swap at a ratio of 1:0.0168936. According to SKT, the share swap will be finalised on 9 June 2015 and SKB will be delisted on 30 June 2015, subject to shareholders' approval.