Antitrust body disapproves of SK-CJH merger
The CJ HelloVision logo is seen in the company’s headquarters in Seoul, Tuesday. / Yonhap
By Yoon Sung-won, Kim Yoo-chul
The Fair Trade Commission (FTC) announced Tuesday that it was tentatively disapproving the proposed takeover of CJ HelloVision (CJH) by SK Telecom (SKT).
After reviewing the proposal over the last seven months, the antitrust agency issued its ban order stressing that the takeover would limit competition in the market.
The antitrust watchdog sent its review to SKT the previous day. The disapproval came as a rare move by the FTC, which endorses or conditionally approves proposals in most cases.
The FTC said if the takeover had been approved, SKT and CJH would have their broadcasting business dominate 21 out of 23 regions in the domestic market, establishing dominance.
Expectations are that SK Telecom will fiercely argue over the properness of its merger proposal with the antitrust agency at the scheduled full session to catch its last chance to resuscitate its drive.
Following the decision, SKT will submit an appeal to a full session of the FTC, scheduled to be held around July 20. At the meeting, standing members of the FTC will make a final decision on the proposal.
Based on the FTC’s opinion, the Ministry of Science, ICT and Future Planning will make its final decision on the issue in consultation with the Korea Communications Commission.
Earlier in November, SKT revealed its ambitious plan to acquire CJH and merge it with SK Broadband, the telecom company’s pay-TV subsidiary, aiming at becoming a global media platform business. CJH is the leader both in the budget mobile service and cable TV markets in Korea.
Both SKT and CJH expressed regret over the disapproval.
“We are shocked at the FTC’s decision,” SK Telecom said in a statement, Tuesday. “We express our deep regret that our plan to contribute to the growth of the pay broadcasting market here has been disapproved.”
The telecom company added, “We are thoroughly reviewing the FTC’s report and mulling over follow-up measures.”
CJH revealed an even harder stance, criticizing the antitrust watchdog for making the decision under an “obsolete” standard for the current pay broadcasting industry facing new challenges from global businesses such as Netflix and YouTube.
“The result of the review is the worst and we cannot understand it considering the future of the cable industry. We regret it very much,” CJH said in a statement. “The cable TV industry has continued to lose subscribers. The disapproval will block voluntary restructuring efforts between businesses and extend the crisis.”
CJH also blamed the agency for dawdling in making the decision.
“The FTC has jeopardized CJH and its employees twice by slowing down the review process and then disapproving the proposal,” it said.
“As the review process has been prolonged for over seven months, CJH has suffered from slowed business operations, postponed investments and the loss of opportunities to diversify. This has degraded our operating profit and business potential.”
Reiterating their opposition to the takeover, KT and LG Uplus welcomed the antitrust agency’s decision while skirting around the issue before a final decision is announced at the FTC full session.
“We have been consistent in arguing that the plan should be disapproved,” LG Uplus said. “We will wait further until the FTC makes an official announcement of its final decision at the full session.”
KT said the disapproval was a “due decision” that prevents limitation of competition in the telecom and broadcasting markets here.
“We have stressed that the takeover should be disapproved for the sake of fair competition in the ICT market here. We will talk more about this issue, but it is still too early to make an official statement.”
KT also said FTC’s decision seems to be made under consideration that SK Telecom had evaded fulfilling the agency’s requested terms when the carrier took over Hanaro Telecom and Shinsegi Telecom in the past.