(The following was released by the rating agency)
HONG KONG (Standard & Poor's) Oct. 24, 2012--Standard &
Poor's Ratings Services today assigned its 'A-' rating to
proposed senior unsecured bonds to be drawn from SK Telecom Co.
Ltd.'s (SKT; A-/Stable/--) $3 billion global medium-term note
Our ratings on SKT reflect the company's leading position in
Korea's wireless telecommunications market; its "strong"
business risk profile, backed by strong, stable operating cash
flow; and its "modest" financial risk profile. At the same time,
our ratings take into account intense competition in the mature
domestic market, uncertainty in the regulatory environment, and
SKT group's aggressive growth strategy--mainly through its
February 2012 acquisition of a 21% stake in semiconductor maker
SK Hynix Inc. (Hynix; BB-/Stable/--).
The stable outlook reflects our expectation that SKT's
strong market position should enable the company to continue to
generate stable cash flows and maintain strong debt servicing
capacity. The stable outlook also reflects our expectation that
SKT will not materially increase its ownership or capital
investment in Hynix in the next few years.
Any of the following could pressure our ratings:
-- A material increase in SKT's ownership or capital
investment in Hynix or in other substantial investments in
-- A substantial weakening of SKT's operating profitability,
likely due to regulatory pressure or intensifying competition,
causing SKT's EBITDA margin to decline to roughly 25%;
-- A rise in debt to EBITDA for SKT--after pro rata
consolidation of Hynix and adjustments for handset receivables
securitizations--above 2.8x on a sustained basis, due mainly to
larger-than-expected handset receivables securitizations; or
-- Debt to EBITDA for SKT--after pro rata consolidation of
Hynix but excluding adjustments for handset receivables
securitizations--above 1.8x on a sustainable basis, likely as a
result of weaker operating performance or larger-than-expected
Though less likely, we may raise our ratings if SKT shows
sustainable improvement in its financial risk profile and a more
conservative growth strategy.
RELATED RESEARCH AND CRITERIA
2008 Corporate Criteria: Analytical Methodology, April 15,