Anatomy of corporate integration

By Hwang Dong-hyun

The government is currently evaluating the proposed acquisition of CJ Hello Vision by SK Telecom.

For a fair and clear assessment, it has been verifying various issues raised at a string of hearings on the plan.

Regardless of these efforts by the government, the deal has caused controversy about its fairness among academic circles and civic associations.

In this context, the argument that the deal should be evaluated thoroughly with sufficient time is gaining ground.

Therefore, the government needs to verify its implications on the broader broadcast communication industry in detail ― from its impact on the competition and the issue of user protection to the public interest.

First of all, it should look into whether the acquisition will alter the structure of the market or undermine the fundamental governmental policy of competition vitalization, by strengthening the dominance of SK Telecom in the mobile communication retail market.

Also, the government needs to review any hindrance on its strategy to lower phone bills.

Concerns about the potential dominance by the integrated enterprise in the pay-per-view broadcast industry must also be addressed.

In the local market, factors causing weaker competition, such as a decrease in the number of competitors and increased market penetration, which greatly reduces competition among businesses, also require scrutiny.

In particular, greater market dominance of combined services and commodities should be reviewed clearly.

The authorities should consider that once the merger is approved, SK Telecom might offer aggressive services with fatter profits and command dominating power.

The significance of integration of a broadcast communication service and a mobile network has been increasing.

Therefore, the possibility of market power accumulating to high-speed Internet and pay-per-view broadcast fields should be examined thoroughly.

Once integrated, the combined entity will be able to offer relatively competitive, diverse combined services based on the subscribers to SK Telecom; the new combination of products from SK Telecom’s mobile network and CJ Hello Vision’s pay-per-view broadcasting system.

Additionally, what the government should consider is user protection as the company may strengthen its market dominance further, restricting competition with its combination of services and then increasing product prices. If the lock-in effect of a combination of products limits consumer options this should also be scrutinized by the government.

Another factor to be considered is its impact on the public interest and fairness of broadcasting, with the deal enabling a large company to air local channels. This could well have a significant influence not only on the formation of public opinion but also elections.

The only shortcut toward genuine convergence of communication and broadcasting is for the government not to neglect issues raised by the market, including the impact on competition, user protection and the public interest.

The authorities need to stem any complaints or disputes by adopting a clear verification process in the ongoing evaluation for the deal between CJ Hello Vision by SK Telecom.

The writer is a professor of the Department of Integrative Liberal Arts and Sciences at Hansung University.