LG Uplus' takeover of CJ Hello hits snag

CJ Hello promotes its cable TV service in its website. / Capture from CJ Hello's website

By Jun Ji-hye

LG Uplus is facing setbacks in its acquisition of CJ Hello, the nation's largest cable television operator, as the Fair Trade Commission (FTC) has decided to put off its decision on business combination between the two companies, according to industry officials Thursday.

The postponement of the judgment is apparently embarrassing LG Uplus which expected FTC members to smoothly reach an agreement on conditional approval of the takeover.

The FTC held a full session, Wednesday, to deliberate on the mobile carrier's acquisition of the cable TV operator, but the members failed to reach an agreement.

“We decided to discuss the issue again after deliberating on a similar case,” an FTC official said.

The similar case refers to SK Telecom's proposed merger between its subsidiary SK Broadband and No. 2 cable TV operator t-broad.

Industry officials said FTC members put off the decision as they shared the need to minimize the impact that the market power of mobile carriers may have on the subscription TV market.

“There have been differing opinions on restrictions on mobile carriers' cross-selling of cable TV operators' products as the principle of equitable treatment has been called into question in dealing with two similar cases,” an official at the telecommunications industry said.

Another controversial issue is a potential divestiture of CJ Hello's low-cost phone business.

The phone service is operated by a mobile virtual network operator (MVNO), providing wireless services at a lower price by renting the necessary infrastructure from telecom carriers.

As CJ Hello is not only the No. 1 cable TV operator but also the top low-cost phone service provider, LG Uplus' rivals ― SK Telecom and KT ― have claimed that CJ Hello's low-cost phone business should be kept separate. They said if LG Uplus were allowed to operate the business, it would distort the rental phone market.

Industry officials said it may take some time for the FTC to make a final decision, contrary to earlier expectations.

In February, LG Uplus signed a deal to acquire CJ Hello for 800 billion won ($674 million). To complete the takeover process, the company needs to receive approval from the corporate watchdog.

Once the takeover process is complete, LG Uplus will go straight to second place from fourth in the subscription-based TV market for services provided by cable, satellite TV and IPTV operators.