Careful scrutiny urged over SKT-CJ deal

By Lee Min-hyung

Calls are growing for the government to scrutinize SK Telecom’s proposed takeover of CJ HelloVision (CJH) more carefully.

The proposal ― which would combine Korea’s top telecom operator with the leading pay-tv operator ― has caused heated debate.

Three government agencies that have the authority to handle the deal ― the Ministry of Science, ICT and Future Planning (MSIP), the Korea Communications Commission (KCC) and the Fair Trade Commission (FTC) ― are expected to complete their toughened screening process for the deal by April at the earliest.

SK Telecom submitted documents and requested approval from the government agencies on Dec. 1.

However, the watchdogs are yet to make any official announcement on when they will rule on the deal. They have only hinted at the possibility of delaying the process, saying they may need more time to scrutinize submitted documents and the ensuing effects.

“SK Telecom is not in a position to make comments on the timing of the approval,” an SK Telecom official said. “Since we submitted documents, the government holds the key for the issue. We will follow the decision made by the three regulatory bodies and continue to cooperate with their screening processes.”

The MSIP previously said it is looking through submitted documents, but declined to comment on the specific time frame for the process.

Rival mobile carriers ― KT and LG Uplus ― want the deal’s approval delayed.

“We ask regulation bodies to make careful consideration over the issue by conducting thorough screening measures over possible effects that the deal may bring on customers’ benefits,” said a KT official. “We believe the investigation will take more time than expected.”

Cases in other countries

Last month, the Competition and Markets Authority in England approved telecommunication company BT’s acquisition of mobile carrier EE. BT had waited for the green light since February last year.

The European Commission (EC) conditionally approved the proposed acquisition of Spanish telecommunication service operator Jazztel by its French counterpart, Orange SA, in May last year, after investigating the issue from December 2014.

The Federal Communications Commission (FCC) in the U.S. granted permission for AT&T, the country’s No.1 telecom, to buy DirecTV, a broadcast satellite service operator, in July last year. It took more than a year to get approval after AT&T announced its proposed takeover in May 2014.

“Foreign regulatory authorities take ample time to conduct thorough scrutiny about M&A deals in the media industry,” an LG Uplus official said. “For a thorough investigation over the issue, Korean regulation authorities may also need careful screening procedures, as this deal can significantly alter the competitive landscape in the media industry.”

But SK Telecom said a takeover between Vodafone and Kabel Deutschland took only three months to approve. The UK-based mobile phone operator announced its takeover plan in June 2013 and was given approval in September of the same year. SK Telecom says the deal is an example of the combination of a telecom operator and cable TV operator in Germany.

The MSIP is also taking a cautious approach to the issue. The watchdog is receiving comments from the public until Feb. 15. Earlier this month, the agency held a discussion, inviting professors from both sides and civic groups to gather opinions from a broader perspective.

CJH mired in controversy

On Friday, CJH was mired in controversy after announcing that it will hold a shareholders’ meeting on Feb. 26 to discuss details of the deal with SK Telecom.

This comes about three months after SK Telecom announced its decision to buy a 30 percent stake in CJH, held by CJ O Shopping, for 500 billion won. The deal will allow the mobile carrier to acquire CJ O Shopping’s remaining 23.9 percent stake in CJH at a later date.

Expectations are that CJ O Shopping will vote in favor of the takeover. But opposition sides have claimed this is against the law, because the nation’s broadcasting act stipulates that a de facto owner for a merged entity is banned from voting before the government grants approval for a takeover.

LG Uplus said: “The shareholders’ meeting is a clear breach of broadcasting acts, as SK Telecom, the de facto owner of CJH, will exercise voting rights during the meeting.”

But CJH said the decision that will be made at the meeting will not take effect unless the government approves the deal, and the meeting will be held within legal boundaries