Foreign regulators' decisions raise concerns over SK-CJ deal

SK Broadband CEO Lee In-chan introduces the company’s business blueprint following SK Telecom’s proposed takeover of CJ HelloVision, during a press conference at the company’s headquarters in central Seoul, in this March 8 file photo. Under the proposed deal, SK Broadband, SK Telecom’s subsidiary, will merge with the nation’s largest cable TV operator. The deal is currently waiting for approval from the government. / Courtesy of SK Broadband

By Lee Min-hyung, Kim Yoo-chul

With the proposed takeover of CJ HelloVision (CJH) by SK Telecom intensifying debate in media circles, foreign regulatory agencies’ recent decisions in similar cases are gaining media attention.

This came as the Korea Communications Commission (KCC) Chairman Choi Sung-joon recently stressed it would comprehensively review decisions made by its overseas counterparts before approving the takeover deal. Choi also visited the KCC’s U.S. counterpart, the Federal Communications Commission (FCC), last month.

He previously said the combination of a mobile carrier and pay-TV operator is unprecedented, so the government agencies ― including the KCC, the Ministry of Science, ICT and Future Planning (MSIP) and the Fair Trade Commission (FTC), would remain as careful as possible.

One of the recent overseas cases came from a decision by the European Commission (EC). Late last month, the regulatory agency said it was considering issuing a statement of objection for a proposed merger of Italian mobile carrier Wind and telecommunications operator 3 Italia.

The move came about two months after the EC decided to launch an in-depth investigation of the deal, amid concerns over a possible telecom monopoly.

Given the KCC chief’s previous remarks, the EC’s intensified response to the merger is expected to cast a massive shadow on the deal between SK Telecom and CJH.

“The EC case will leave the nation’s regulatory agencies _ including the KCC and the MSIP _ in a dilemma over the takeover deal,” said an LG Uplus spokesman. “Given the growing concerns over the deal, expectations are that SK Telecom may voluntarily withdraw its decision to take over CJH.

“The EC decision came amid worries that the deal between Wind and 3 Italia may raise telecom fees, hurting customers’ right,” said the spokesman. “The EC plans to issue its final decision as early as August. Even though the agency may not disapprove of the deal, it is expected to attach a strong regulatory measure to the controversial takeover deal, in a move to protect the competitive landscape within the telecom industry.”

Another regulatory measure for a telecom takeover came from the London-based regulation agency Competition and Markets Authority (CMA) which recently sent a statement of objection to the EC over the merger between mobile operators 3UK and O2. The CMA asked for disapproval of the takeover deal unless a regulatory measure is set in place.

This was not the first time that the CMA issued a complaint over the deal, citing concerns that the merger may hurt the nation’s fair trade ecosystem. The agency said the deal is likely to reduce the quality of mobile services and increase telecom fares, with the two companies failing to offer remedies to dispel such worries.

Stressing such concerns, the agency urged the EC to make a cautious decision, which the CMA said shows its disapproval of the deal.

“The Korean government is expected to take more time before making its own decision over the deal, considering such a sensitive M&A landscape in the telecom industry,” said the spokesman.

SK Telecom unveiled last November its plan to acquire the nation’s largest cable TV operator for 500 billion won ($433.91 million). This has since sparked a strong backlash from its rivals ― KT and LG Uplus, which claimed that the deal will help SK Telecom expand its monopolistic posture into the broadcasting sector.

SK Telecom, for its part, also dispelled such worries, arguing that it will invest heavily in developing the nation’s media industry after the takeover deal.

The nation’s three regulatory agencies have yet to make their decisions over the deal. They voiced their consensus that the case should be taken seriously, given strong reactions from various media circles.