Deal of the day: Mongolia “saturated” with mobile phones

Even Mongolia has got crowded for mobile phone companies.

Thursday’s announcement that South Korea’s SK Telecom, has sold its 29.3 per cent stake in a Mongolian mobile carrier because of a “saturated” market, proves the point.

South Korea’s most popular mobile carrier by subscribed user accounts has sold all of its stake in Skytel for 28.3bn (US$ 25.4m).

The company said Mongolia was no longer compelling because the penetration rate in the mobile phone markets had crossed 60 per cent.

The move is part of SK Telecom’s strategy to exit out of unpromising markets and focus on building more advanced mobile platforms based on IP (internet protocol), according to an SK Telecom spokesperson.

South Korea has one of the highest wireless penetration rates in the world, with over 97 per cent of the population in possession of a mobile phone and competition is cut-throat. In order to continue growing SK Telecoms has long looked abroad for markets with growth potential.

But it has exited or plans to exit a number of its overseas investments including Skytel. In September last year it sold its entire 3.8 per cent stake in China Unicom, and in June 2008 it sold its unprofitable US unit, Helio to Virgin Mobile USA, which was later acquired by Sprint Nextel.

SK Telecom first acquired a 20 per cent stake in Skytel in 1999 in exchange for its outdated analogue telecom equipment. Later it invested further 6m Korean won to add a 9.3 per cent stake.

“Korea has long had a close relationship with Mongolia right down to sharing the same language stream,” one Mongolian investment expert said.

Korea views Mongolia as a balance between Russia and China and has always been welcomed economically… the move out would seem purely strategic and specific to SK Telecom.

Skytel was first established as a joint venture between SK Telecom and Taihan Electric Wire, the listed South Korean wire maker. Taihan sold its 34 per cent stake last November for US$26m as part of its financial restructuring effort.

SK Telecom said it would focus on maintaining growth in its most recent acquisition in Malaysia. Last May it acquired a 25.8 per cent stake in Packet One, the Malaysian telecoms operator, for US$ 100m.