SK Telecom, Korea's largest mobile-phone company, will buy 49% of Hana Financial Group's credit card unit for W400 billion ($343 million).
Hana Card Company will issue 57.6 million new shares to SK Telecom to make up the 49% stake. Hana Financial Group, Korea's fourth-biggest financial services firm, will continue to own the remaining 51%. Hana Card was first established as the credit card arm of Hana Bank in 1992 and was spun off in November this year.
Over time, the board of directors of Hana Card will be changed to reflect the new equity ownership structure but it is not currently anticipated that there will be any change to the management of Hana Card, said a source close to the transaction.
Hana Financial Group was advised by Credit Suisse. SK Telecom worked with UBS on the deal.
SK Telecom is buying into a credit company that has an estimated 5% market share in Korea and approximately 6 million cardholders as of September 2009.
SK Telecom is the largest wireless service provider in Korea with an estimated 23 million customers and a market share of more than 50%. It intends to use this investment as an opportunity to be an innovator in the mobile technology and banking space.
Financial services firms, including credit card companies, have thought of partnering with mobile phone companies in the past but this is the first time an equity partnership has been forged between a credit card company and a telecom firm.
SK Telecom's chief executive officer, Man-Won Jung, said one aim of the partnership is to expand the use of mobile credit cards. Mobile credit cards allow customers to use their mobile phones as credit cards and receive information provided by card companies, such as event notices and discount offers, simply by inserting the credit card information into their mobile phones. Users can then check credit card settlement information, including details of credit card usage, remaining credit card limit and reward points as well as other real-time information like bank accounts and memberships.
The usage of mobile credit cards will benefit various parties. Customers will be able to receive information and benefits; credit card merchants will be able to boost sales and attract more customers by using information such as consumer purchasing patterns; and card companies will generate greater sales, reduce lead times and save costs. SK Telecom plans to introduce mobile credit cards in the second half of 2010.
Korea, which is very tech-savvy, is ideally placed for a deal like this with a very high mobile phone penetration rate, said a source. The deal could perhaps be replicated in countries such as India and maybe some African countries, although replication is less likely in some western markets like the US and UK.
The SK Telecom investment is subject to approval from Korea's Financial Services Commission.