SK Telecom Eyes Investment In Blockbuster: Source
SK Telecom (017670.KS), South Korea's top mobile carrier, is considering investing in bankrupt U.S. video rental chain Blockbuster Inc (BLOAQ.PK), an official with the operator said on Wednesday.
Blockbuster in February agreed to sell itself to a group of creditors for $290 million in a "stalking horse bid," used as a starting bid or minimally accepted offer that other interested bidders must surpass if they want to buy the company.
"We are considering investing in Blockbuster as we are looking at many opportunities overseas. But no details have been decided," an official at SK Telecom said on condition of anonymity, as she was not authorized to talk to the media.
A company spokesperson declined to comment.
SK Telecom, which controls around 50 percent of the nearly saturated domestic market, has been looking for opportunities to invest overseas to generate new revenue streams.
But the news about the potential Blockbuster investment, previously reported by the New York Post, came as a surprise to some analysts who raised doubts about the outlook for the movie rental business.
"We are slightly perplexed by (SK Telecom's interest) because no immediate synergies come to mind and the required restructuring of the company could be very costly," David Lee, an analyst at CLSA said in a report.
"A consummated Blockbuster deal would be quite negative due to the large size of the company and its declining business," he said.
Blockbuster, which has 2,500 locations, filed for bankruptcy in September after years of struggling to keep up with competition from Netflix Inc (NFLX.O) and online offerings.
Byun Sung-jae, an analyst at Daewoo Securities, said the potential purchase could help SK diversify its content sourcing, adding that the price could be lower than $290 million.
Shares in SK Telecom were down 0.31 percent in a broader market .KS11 that was up 0.91 percent at 0405 GMT.
The carrier's overseas investments so far have produced few tangible results, analysts say.
The operator exited the U.S. market in 2008, selling its struggling mobile unit Helio to Virgin Mobile USA, and sold back its stake in China Unicom (0762.HK) for $1.3 billion in 2009.