Rivals cry foul over SKT’s merger plan

Mobile carrier SK Telecom’s desire to increase its presence beyond the mobile network industry into the media content platform segment has sparked a backlash from its rival network operators KT and LG Uplus.

SKT, which has Internet Protocol TV operator SK Broadband under its wing, has been pushing to acquire Korea’s top cable TV operator CJ Hellovision.
 

The No. 1 telecommunications firm, with its market share reaching almost 50 percent, would then merge it with its wholly owned SK Broadband.

The twofold M&A, if approved by the government’s regulatory agencies, would be a watershed in the local cable TV industry, posing a formidable challenge against KT, the current cable TV industry leader with 8.4 million subscribers under its IPTV service olleh and satellite TV service Skylife. SK Broadband and CJ Hellovision currently have 3.3 million and 4.2 million subscribers, respectively.

While SKT insists that the proposed deal is in line with its efforts to gain a competitive edge in the global media platform market, its rivals are crying foul. They claim that SKT, if its plan is approved, would easily take control of the TV sector, using its leading position in the telecommunications market.

The cable TV market players attract subscribers by competitively offering cheaper TV subscription plans, often bundled with wireless or broadband services.

The government authorities -- the Ministry of Science, ICT and Future Planning, Korea Communications Commission and Fair Trade Commission -- will review SKT’s application for the M&A, with their verdict expected to be out in February.

“The M&A plan has nothing to do with SKT’s plan to enhance its competitiveness in the global media market, but is aimed at increasing its control in the TV media sector, leveraging its influence in the mobile network segment,” said LG Uplus in a statement.

“The 5 trillion won investment that SKT has vowed since the announcement of its M&A plan to improve the local media market for the next five years was just a play of words,” added an official from the company, pointing out that the combined annual capital expenditures of SK Broadband and CJ Hellovision already reached 1 trillion won in 2014.
 

CJ Hellovision, which tops the local mobile virtual network operator industry, can also give a boost to SKT, which boasts a 50 percent market share in the mobile network sector compared to KT’s 30 percent and LG Uplus’ 20 percent, in cementing its dominance in the mobile network industry, according to the opposition side.

SK Telink, the second-largest player in the MVNO segment, is affiliated with SKT.

Mobile virtual network operators, which rent networks from the big three network operators, provide mobile services at lower costs than those of the biggest three.

The latest move by SKT is also considered to be part of the firm’s efforts to brace for the Korean launch of online streaming TV service Netflix next year.

Netflix, which provides its Internet-based streaming video services to 69 million subscribers in 60 nations, is expected to bring an overwhelming change to the local media market.

“The cable market needs to shift its focus toward providing quality services from quantity-oriented approaches,” said Lee Hyung-hee, head of SK Telecom’s mobile network business.

Kim Hong-sik, an analyst from Hana Daetoo Securities, cast a positive outlook on the approval process in his recent financial report, saying that “it is hard to pinpoint negative effects that the merger deal could bring to the cable market and consumers.”

By Kim Young-won (wone0102@heraldcorp.com)