The Fair Trade Commission has virtually rejected SK Telecom’s request to take over CJ HelloVision (CJH), the nation’s top cable TV operator.
The antitrust agency did not approve the 1 trillion won ($870 million) deal, saying it would hamper fair competition in the pay-TV market. Specifically, the FTC said the takeover, if realized, would make SK Telecom, the No. 1 mobile carrier, the leading service provider in 21 of the nation’s 23 broadcasting blocs where CJH is currently in operation.
It’s quite rare for the fair trade regulator to put the brakes on corporate merger and acquisition bids. Given the need to block widening monopolies in the telecom and broadcasting industries, the rejection may be welcomed. The FTC would also have considered the adverse effects arising from the marriage of the top telecom and cable TV operators, which could have allowed the merged giant to abuse its dominant market position.
However, the agency’s unusual decision created a stir, raising questions about whether it was made purely out of economic considerations.
First and foremost, it took seven months for the FTC to reach its conclusion on SK Telecom’s plan to acquire CJH and merge it with SK Broadband, its wholly-owned Internet-protocol TV (IPTV) service provider. As the regulator’s review has dragged on, there has been mudslinging between SK Telecom and its rivals KT and LG Uplus. Furthermore, SK Telecom and CJH have hit snags in revamping their businesses and drawing up investment plans.
SK Telecom, KT and LG Uplus all operate IPTV services, which are similar to cable TV, using their Internet networks. SK Telecom’s merger with CJH would have created a giant with a 25.8 percent market share, but that still falls short of KT’s 29.4 percent.
Most importantly, it has become all but impossible to expect preemptive and voluntary restructuring to be realized in the cable TV industry, which has been shrinking ever since the appearance of IPTV services here. That runs counter to the government’s policy direction calling for the proactive restructuring of troubled industries such as shipbuilding and shipping.
The decision is certain to deprive consumers of the chance to benefit from increased competition and cause SK Telecom to give up on its dream to be an all-around media platform operator by making massive investments in content and network building.
The antitrust agency will convene a plenary session by the end of this month to decide on its final position on SK Telecom’s takeover bid. It should reach a final conclusion only based on the future of the relevant industries and the interests of consumers.