Those familiar with Motley Fool Global Gains recommendation SK Telecom
Add one more business to the pile: an "Internet shopping mall."
According to a report at Korean news site Yonhap, SK is looking to acquire an Internet retailer, rather than continuing its current policy of providing other companies access to its user base. Smart business, or deworsification? What would you think if Verizon
While I believe it's true that Korean customers, like their neighbors in Japan, may be far more likely to purchase goods and services via data-enabled mobile handsets than we are here in the States, I'm wary of the strategy. After all, the Korean phone biz is already cutthroat, and the government's heavy-handed regulation has long ensured that SK can't broaden its customer base. Will the government look kindly on this plan?
Finally, the above-mentioned Yonhap report claims that there are currently more than 4,500 "cyber shopping malls" serving Korean consumers. That sounds like another cutthroat biz. What if SK bets on the wrong pony? And how will consumers respond if SK takes what I consider the likely step of overtly favoring its own brand (and even excluding others)?
SK's strong cash flow generation and fine returns on capital probably mean we should give it the benefit of the doubt; the deal is still in the talking stage, anyway. But we should also keep our eyes peeled to make sure that management is doing the right thing with all that shareholder capital. Past performance is no guarantee of future returns.
Seth Jayson recommended SK Telecom for Motley Fool Global Gains, but that doesn't mean it gets a free pass. If you'd like to research stocks with a team that isn't afraid to think critically about its own work, a free trial will get you there.
At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Amazon and eBay are Motley Fool Stock Advisor recommendations. The Motley Fool has a disclosure policy.