Experts clash over SKT-CJ deal at forum

Professors of economics and media studies discuss the possible effects that the proposed deal of CJ HelloVision by SK Telecom will have on the nation’s telecom and broadcasting markets, at the Korea Federation of Banks (KFB) headquarters in central Seoul, Wednesday. The Ministry of Science, ICT and Future Planning hosted the session amid mounting worries over the fair competition issue that the deal, if approved, may bring. / Korea Times photo by Lee Min-hyung

This is the second in a series of articles analyzing the effects on the local telecom market of SK Telecom’s proposed takeover of CJ HelloVision — ED

By Lee Min-hyung

The proposed takeover of CJ HelloVision by the nation’s dominant mobile carrier SK Telecom is intensifying confusion in the media industry, raising worries over the latter’s possible market domination of the broadcasting sector.

“SK Telecom’s possible market domination is evident, given the previous record of the company’s high-speed Internet business,” said Kang Byung-min, a professor at Kyung Hee University’s business administration department, in a debate forum at the Korea Federation of Banks (KFB) headquarters in central Seoul, Wednesday. The Ministry of Science, ICT and Future Planning held the session, inviting professors of economics and media studies to analyze the effects that the proposed deal may have on the nation’s telecommunication and broadcasting markets.

“The company has seen an 11.4-percent increase in its market share of the high-speed Internet business, only four years after it started the service,” he said. “This implies that the latest deal, if approved, is expected to help SK Telecom expand its dominance into the broadcasting sector as well.”

CJ HelloVision is the nation’s leading cable TV service operator and mobile virtual network operator (MVNO).

But Kim Sung-hwan, a professor at Ajou University, countered the claim by saying, “CJ HelloVision holds some 840,000 subscribers for its telecom service, accounting for only 1.5 percent of the total telecom market share.” The small telecom market share may not bring much synergy for SK Telecom which has some 43.5 percent of the broadcasting market share, according to the professor.

Kang refuted the claim, saying the issue should be considered in a broader sense as SK Telecom is running various businesses including telecom and Internet protocol TV (IPTV) operated by its wholly owned subsidiary SK Broadband.

“The deal is not about 1.5 percent synergy,” Kang said. “This will bring a much bigger impact on the nation’s telecom, budget phone and even broadcasting sector.”

Experts said that relevant ministries will decide whether to approve the deal in consideration of a possible increase in service fees following the merger and acquisition (M&A) deal.

“Economic effects the M&A deal may create are also very limited,” Kang said. “SK Telecom does not have to invest in building more facilities, nor does it have any reason to develop new technologies after the M&A. There is also limited possibility of job creation.”

In November, SK Telecom signed a deal with CJ HelloVision in its bid to expand its presence by building a converged media platform including both the telecom and broadcasting sectors. The deal, if approved, will allow SK Broadband, SK Telecom's wholly-owned subsidiary, to merge with the cable TV affiliate of SK Group by April.

Following the announcement, SK Telecom’s rivals, runner-up KT and the third LG Uplus, stepped up their criticism over the issue, claiming that the deal may break the fair competition within the media circle and will only help SK’s presence into the broadcasting sector.

In particular, LG Uplus issued a statement that reads, “SK Telecom is expected to launch bundled products including cable TV and telecom service.” Uplus claimed the combination will only hurt fair competition and intensify SK Telecom’s dominance into both sectors.

LG Uplus cited an example of an M&A deal between U.S. telecom market leader AT&T and broadcasting operator DirectTV.

“The U.S. government approved the proposed deal between the two companies, as the deal is expected to benefit both parties,” Uplus said in a statement. “But there is not any proof to show that the deal between SK Telecom and CJ HelloVision is mutually beneficial. This will only worsen the market environment, thereby intensifying SK Telecom’s monopolistic structure.”