Delayed Gov’t Review on t-broad Merger Worries SKT

Subscription TV market shares of major telecommunication companies. / Source: Ministry of Science and ICT

Industry officials said on Monday that SK Telecom worries about the delay over the government deliberation of the merger between its SK Broadband subsidiary and t-broad, the country’s second-largest cable TV operator. The suspension will hamper the mobile carrier’s preparations for next year.

The telecommunications company’s growing concern is mainly due to its rival LG Uplus getting final approval to take over CJ Hello, South Korea’s largest cable TV operator, from the Ministry of Science and ICT. LG Uplus’ takeover will help the company become the second-largest subscription TV service provider with a 24.72 percent market share following KT Group.

Subscription TV service provider refers to services provided by satellite TV, IPTV operators, and cable.

The ministry’s approval is the final step in LG Uplus’ takeover of CJ Hello. The mobile carrier acquired a 50 percent stake plus one share of the cable TV operator from media giant CJ ENM for $683 million (800 billion won).

Unlike LG Uplus, SK Broadband’s plan to merge with t-broad needs to receive consent from the Korea Communications Commission (KCC) aside from the approval from the ministry, with the merged entity to operate afterward.

SK Broadband is a wholly owned internet service and IPTV subsidiary of SK Telecom.

The Ministry of Science and ICT, however, still needs to set a date to deliberate on the takeover between the two firms, which would also delay the deliberation by the KCC.

Lee Tae-hee, head of the ministry’s network policy department, said, “We are working hard in completing the deliberation process quickly, but it will not be easy to decide within the year, given the merger also needs to go through the KCC’s consent.”

SK Telecom announced in February announced a proposal for the merger between t-broad and SK Broadband at a ratio of 1 to 3, respectively, to expand further the local entertainment business.

T-broad is an affiliate of Taekwang Industrial, a manufacturer of synthetic fiber, textile, and advanced petrochemical materials.

At the time of the announcement, the telecom firm said it aims to complete the process by the end of the year, launching the merged entity by January 2020.

However, the company suspended the launch of the consolidated entity until March 1 next year since the deliberation by the Fair Trade Commission (FTC) took longer than initially predicted.

The commission gave approvals on November 6 to SK Broadband to merge with t-broad, and to LG Uplus to acquire CJ Hello.

SK Telecom said on Friday that it was delaying launching the merged entity again until April 1, Amidst increasing doubt over the schedule of the ministry and KCC’s deliberation.

An official in the telecommunications industry said, “The delay in the government deliberation would pose a setback to SK Telecom’s work to draw up their 2020 business plans at a time when LG Uplus completed the acquisition of CJ Hello and is moving in earnest to enhance its presence in the subscription TV market.”

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