Electric vehicles are parked at SK Rent-a-Car's branch on Jeju Island in this undated file photo. Courtesy of SK Networks

SK Networks' recent decision to unload SK Rent-a-Car is drawing attention from market insiders who wonder how the trading firm will spend 850 billion won ($617 million) to be earned from the forthcoming sale of the profitable car rental service provider, according to industry officials, Thursday.

The company explained that the money will be used for its growth in the future, but securities analysts anticipate enhanced shareholder return policies after the deal.

Earlier this week, SK Networks' regulatory filing showed that Affinity Equity Partners was selected as the preferred bidder to acquire the entire stake in SK Rent-a-Car. The seller said that it made the decision after reviewing whether its car rental business is helpful to the company's plan to shift its focus to the artificial intelligence (AI) sector.

"We reached a conclusion that the sale will stabilize our financial structure and enable our growth in the future," SK Networks said in a press release.

However, the company declined to elaborate on how it plans to invest the funds in its AI business.

"It is difficult to disclose our plan at this moment, as our contract with the private equity firm is unfinished," an SK Networks spokesman said.

Hana Securities analyst Yoo Jae-sun mentioned the possibility that SK Networks may use part of the money for its shareholders.

"Earnings from the sale will likely be used partially to repay debts, and if the money is categorized as return on investments, it can be used to distribute interim dividends," the analyst said. "The deal may lead to enhanced shareholder returns."

SK Rent-a-Car became Korea's second-largest car rental company, after the merger of AJ Rent-a-Car with SK Networks' own car rental business in 2019. Although it has been a cash cow for the parent firm, the car rental unit has faced huge debts, due to the nature of the industry.

Following a series of interest rate hikes, the debt has forced SK Networks to pay significant interest.

Korea Investors Service pointed out that aggressive reorganization will be necessary for SK Networks to avoid a downgrade in its credit rating after selling SK Rent-a-Car, considering handsome profits from the lucrative business.

"Once the deal is closed, we will monitor its impacts on the company's management and finance," the local ratings agency said.

SK Networks President Choi Sung-hwan speaks during an annual general meeting for institutional investors at Conrad Seoul in this February file photo. Courtesy of SK Networks

Industry officials also expect SK Networks President Choi Sung-hwan, the company's largest individual shareholder, to strengthen his control with the money to be earned after selling SK Rent-a-Car. The son of former SK Networks Chairman Choi Shin-won, an older cousin of SK Group Chairman Chey Tae-won, has accelerated the company's AI transition, since he inherited the managerial right from his father three years ago.

There is also a view that the SK Rent-a-Car deal heralded the beginning of SK's group-wide restructuring, which has been expected since Chey Chang-won, the former SK Networks chairman's younger brother, was appointed late last year to lead SK Supex Council, the group's control tower. He is reportedly pushing ahead with sales of the group's non-core affiliates, to prevent a series of M&A deals signed in the past from causing a liquidity crisis.