KT-KTF Merger Expected During 1st Half
By Kim Tong-hyung
Staff Reporter
Telecommunication companies here are forced to compete in a country with more mobile phones than heads and broadband connection as easily accessed as tap water.
Now, with an ailing economy threatening to put further strain on growth, telephony carriers find themselves thinking more about scale than technology as they brace for a wave of mergers and acquisitions about to hit the industry.
The most anticipated deal is obviously KT's merger with its wireless subsidiary, KTF, which looks to be headed for completion in the first-half of the year.
KT, the country's biggest telephone company and possessor of nearly 90 percent of fixed-line customers and nearly 45 percent of broadband Internet subscribers, is reeling from the erosion in its traditional voice business, which continues to lose customers to mobile telephony and voice over Internet protocol (VoIP) services.
Absorbing KTF, the country's No. 2 wireless carrier behind SK Telecom, has been suggested as a natural solution and KTF officials are planning to file for approval to the Korea Communications Commission (KCC) by the end of the month.
The KT-KTF merger is expected to be the first of many, with bigger companies looking to consolidate their smaller subsidiaries to enhance the efficiency of their business lineups and rationalize investment.
SK Telecom, the top wireless carrier, has its eye on SK Broadband, the country's No. 2 fixed-line telephony and broadband Internet carrier. LG Group's three telecommunications companies ― LG Dacom, LG Telecom and LG Powercomm ― are likely to be combined as well.
Since its privatization in 2002, KT, the country's former telecom monopoly, has seen its annual revenue stalled at around the 11 trillion won (about $8 billion) level as it labors on with a decaying business model.
By swallowing KTF, KT can bulk up into a company with some 19 trillion won in revenue and 1.2 trillion won in net profit, according to estimates based on the two companies 2007 numbers, and regain the edge in its battle with SK Telecom over industry supremacy.
``We have heard that KT will file the paperwork before or after the Lunar Near Year holidays,'' said an official from KCC, the country's broadcasting and telecommunications regulator.
``Once we get the papers, we have no intention to drag out the review process,'' he said.
After KT submits the documents, the KCC will have 90 days to decide whether to allow the merger. An approval by regulators will allow KT to complete the merger before June, industry sources said.
KT declines to confirm such claims, saying that no concrete decisions have been made at this point, but it seems apparent that the marriage preparations are gathering speed.
KT recently completed plans to reshuffle its organizations, centering consolidating its seven business divisions into four (individual, household, enterprise and network customers units) on the premise that it unites with KTF.
It's telling that the company hasn't laid out succession plans for interim KTF chief executive Kwon Haeng-min, who took the management helm after former CEO Cho Young-ju was arrested on bribery charges last October, whose term ends in March.