LG to Combine Telecom Units
By Kim Tong-hyung
Staff Reporter
The LG Group is planning to consolidate its three telecommunications subsidiaries by the end of the year as it looks to add bulk to compete with bigger industry rivals KT and SK Telecom.
The combining of LG Telecom, LG Dacom and LG Powercomm follows the merger between KT, the country’s biggest telephone company and Internet operator, and its wireless unit, KTF, earlier this year.
Industry watchers expect the slew of mergers in the telecommunications industry to end with SK Telecom, the No. 1 mobile telephony operator, absorbing its fixed-line telephony and broadband Internet unit, SK Broadband, possibly sometime during next year.
``LG has been seriously considering a consolidation of its fixed-line and wireless telecommunications business. There has been talks in the markets about a merger between two of the units, but we believe combining the three is a more effective solution, considering cost or in generating synergy,’’ LG said in a statement.
LG Telecom is the smallest of the country’s three mobile telephony carriers, while LG Dacom provides fixed-line and Internet telephony and Internet protocol television (IPTV) services. LG Powercomm is the broadband Internet unit.
The three LG affiliates plan to hold a shareholders’ meeting later this month to seek approval for the consolidation under LG Telecom. If the move is approved by shareholders, LG Telecom becomes a company with around 7.2 trillion won in sales and 900 billion won in operating profit.
LG is also moving to establish a separate retail arm to support the combined telecommunications company. Former KT chief executive Lee Sang-chul was recently hired by LG as an advisor to look over the consolidation process, company officials said.
``There is a lot of reasons for LG to combine its three telecommunications units, considering the convergence between fixed-line and wireless telephony, the economy of size and also financial stability,’’ said Choi Nam-gon, an analyst from Tongyang Securities.