SK Global hid losses of $1.2bn

The deal saw SK Telecom spend 332.5bn won ($281m; �176m) on 2.73% of the country's top steelmaker, Posco.

But the shares were bought from SK Corp, a fellow member of one of South Korea's largest conglomerates - triggering fears that the purchase was about helping SK Corp bail itself out of the scandal surrounding its trading arm, SK Global.

Investors have long been concerned about corporate governance at South Korea's big industrial groups, and the renewed worry forced SK Telecom's shares into a tailspin.

Helping hand

SK Corp is Korea's biggest oil refiner, but is better known for the tribulations surrounding SK Global.

The market, given recent history, will suspect that at least part of the agenda was to provide cash flow to SK Corp Merrill Lynch

A 1.5 trillion won ($1.27bn; �794m) accounting fraud discovered in March sent SK Global to the wall with debts estimated at 9.93 trillion won, and its parent is trying to raise money to allow a bailout.

But the banks are closing down fresh credit - and the courts are due to hear bankruptcy proposals from the trading firm's domestic creditors on Thursday after talks with foreign lenders broke down.

SK Telecom - a fellow member of the SK Group, one of the so-called chaebol conglomerates that have dominated Korean business for decades - has thus far managed to stay out of the affair.

But now it appears to some that the old habit of using strong units to rescue weak ones is back with a vengeance, said observers.

"We believe this action reaffirms our view that corporate governance concerns remain at SK Telecom," said investment bank Morgan Stanley in a note to investors.

Merrill Lynch concurred, warning it was "uncomfortable" with some aspects of the deal.