Watchdogs in dispute over SK-CJ merger deal

Carriers remain poles apart over delayed screening

By Lee Min-hyung

A dispute is deepening between watchdogs over the proposed takeover of CJ HelloVision (CJH), further slowing the completion of the controversial deal.

The Ministry of Science, ICT and Future Planning (MSIP) and the Fair Trade Commission (FTC) are complaining about each other about delayed reviews.

The slow reviews of the takeover ― combining the nation’s largest pay-TV operator and the largest mobile carrier SK Telecom ― has seen major rivals KT and LG Uplus raising complaints with the government agencies, since SK announced the takeover in early November.

Expectations were that the watchdogs would end their reviews around early April. SK Telecom submitted documents on Dec. 1 asking for approval of the deal.

But none of the regulators has yet to announce a decision, citing the complexity and gravity of the issue. Growing debate in the media and the telecom industry has also added to delaying a decision.

Amid rising concerns, MSIP Minister Choi Yang-hee said, “We hope the FTC will make a decision as early as possible, so we can draw up policies on the issue.”

He also expressed regret about the FTC’s delayed review process.

“We have to decide whether to approve or disapprove the deal, but the FTC’s review is coming later than we expected,” he said.

The remarks, however, drew a backlash from the FTC.

FTC Chairman Jeong Jae-chan said, “The MSIP can make a final conclusion without being legally bound by our decision.”

He stressed that the FTC can only notify or deliver guidelines to SK Telecom and CJH.

“The FTC cannot use such terms as “M&A disapproval,” but can only order the relevant parties not to limit the competitive landscape within the industry,” Jeong said.

He also hinted that the watchdog’s review process may take more time, as a merger between the telecom and broadcasting sectors is unprecedented here.

“This is the first M&A case between broadcasting and telecommunications.”

Carriers expressing mixed reactions

SK Telecom said the delayed review process comes as a burden, casting a negative impact on its business plans.

“We cannot draw long-term investment plans, due to the uncertainty over the deal,” said an SK Telecom official.

He said the unclear outlook for the takeover would hurt not just the company, but its Internet-protocol television (IPTV) affiliate SK Broadband and CJH.

However, an LG Uplus spokesman said he agreed with the FTC’s stance, saying the deal needs a comprehensive and thorough review, due to the huge impact it would have on the broadcasting and telecom industries.

The official said, “SK Telecom announced it would invest 5 trillion won over five years after it acquires CJH, but the investment volume is no bigger than that of the deal’s separate entities ― SK Broadband and CJH.”

In 2014, SK Broadband’s annual investment was 600 billion won, with that of CJH coming in at some 356 billion won, according to the official.

“The sum of each company’s annual investment plan is worth 1 trillion won,” he said. “The five-year investment plan is not special, as SK Broadband and CJH already make similar investments, regardless of the takeover.”