Media union calls for regulation over SK Telecom-CJ deal

A group of media industry officials and experts discuss the effects of a proposed takeover of CJ HelloVision by SK Telecom at the headquarters of the People’s Solidarity for Participatory Democracy in central Seoul, Thursday. / Yonhap

By Lee Min-hyung

A media union has raised concerns over the proposed takeover of CJ HelloVision (CJH) by SK Telecom, calling for the government to use concrete screening criterion for the deal.

A group of media industry experts, union officials and experts held a panel discussion to predict the effect that the deal will have on the industry landscape. Panelists, including a lawyer and professor, argued the merger and acquisition (M&A) will harm the public interest and raised worries over SK Telecom’s possible dominance of the broadcasting industry.

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Our major concern is that the government does not have a clear roadmap or policy for the M&A between a mobile carrier and cable TV operator,” said Kim Dong-won, a director at the National Union of Media Workers, in central Seoul. “The proposed deal is unprecedented, which means the Ministry of Science, ICT and Future Planning (MSIP) should take careful consideration and come up with detailed regulative measures before making its decision.”

The growing controversy started in November last year when SK Telecom, the nation’s No. 1 mobile carrier, announced a plan to take over CJH. The latest in a series of opposition moves came Monday when a coalition of 14 civic groups submitted a written request to the MSIP, asking for a stricter and fairer screening process.

SK Telecom previously claimed the deal would help the company boost its global presence in the media sector, as it will allow the company to offer converged media services with CJH’s strong presence as the nation’s largest cable TV operator.

However, critics countered the claim saying: “SK Telecom claims the latest move is part of its efforts to find new revenue sources, but the deal, if approved, will significantly change the nation’s media landscape.”

Concerns over limited competition

The panelists also said the deal will likely limit competition in the media industry.

“SK Telecom has held more than half of the telecom market share for the past 10 years, while rivals KT and LG Uplus hold only a 30 and 20 percent share, respectively,” said Sung Chun-il, a lawyer and a member of the People’s Solidarity for Participatory Democracy.

Three government agencies ― the MSIP, the Korea Communications Commission (KCC) and the Fair Trade Commission (FTC) ― will conduct the screening process for the deal.

“The FTC will unlikely to approve any M&A which is expected to limit competition in a market,” Sung said.

“The government has been receiving applications for the fourth mobile carrier for seven years, but it has yet to find a suitable one,” she said. “This means the media market is very limited in terms of accepting new suppliers. In this uncompetitive landscape, customers are the biggest victims, as they have only a few services options to choose from.”

She also cited data from the Korea Information Society Development Institute (KISDI) to support her claim that the deal will hurt fair competition in the media industry.

“In terms of accumulated operating profit over the past ten years, SK Telecom has taken up about 80 percent in the telecom market, while KT and LG Uplus holding only 20 and almost zero percent, respectively.”

According to her, this shows the deal will not encourage SK Telecom to make enough efforts for constructive development of the media industry.

However, SK Telecom claims this goes against the market economy.

“A company’s operating profit is the result of efficient management efforts, and this cannot be a standard to judge its dominating power in a certain market,” said a spokesman.

SK Telecom submitted documents to government agencies Dec. 1, seeking approval. The three are scrutinizing the documents, but nothing has yet been decided over the time frame for the deal.

Rival mobile carriers and the civic groups want the agencies to come up with new policies for the unprecedented takeover deal, while SK Telecom claims their move is against the market economy.

SK Telecom previously announced it decided to buy a 30 percent stake in CJH, held by CJ O Shopping, for 500 billion won, in a move to seek synergy in the broadcasting and telecom sector. The mobile carrier will acquire CJ O Shopping’s remaining 23.9 percent stake in CJH at a later date. The deal, if approved, will allow SK Broadband, SK Telecom’s wholly-owned subsidiary, to merge with the cable TV operator.

Amid rising debate, SK Broadband CEO Lee In-chan pledged Wednesday that the company will invest more for the merged entity, thereby gaining more competitiveness in the competitive global media landscape.