By Kim Yoo-chul, Lee Min-hyung
SK Telecom said Monday that its proposed takeover of CJ HelloVision (CJH) will spur “healthy competition” between telecom firms and give consumers expanded choices in pay-TV content.
“Chances are low that the acquisition will limit consumer choice and hurt fair competition in the related industry, as the takeover deal will improve content-sourcing power and economies of scale. This surely will be a win-win deal for all interested parties and existing market players,” SK said in a statement to The Korea Times.
SK Group’s telecommunications affiliate stressed that the local pay-TV market, which is currently led by its chief local rival KT, needs a “new challenger” to vitalize the market.
“Telecom operators need new growth momentum, while the local pay- and cable-TV industries need a breakthrough to shrug off stalled business growth. Definitely, we need something new and new dynamics,” according to the statement.
Because the acquisition plan is a combination between the nation’s top telecom operator and biggest pay-TV player, competitors KT and LG Uplus teamed up to oppose the deal by asking government authorities to scrap the SK plan.
The deal would cost SK Telecom about 1 trillion won. It plans to initially pay 500 billion for a 30 percent stake in CJH, currently held by CJ O Shopping, and is likely to acquire CJ O Shopping's remaining 23.9 percent stake in CJH at a later date through call and put options.
The plan is being reviewed by the Fair Trade Commission, the country’s anti-trust regulator, as well as Korea Communications Commission (KCC) and the Ministry of Science, ICT and Future Planning (MSIP), which hold the authority either to approve or block the deal.
The three government authorities delayed their timing to approve the deal as the plan is receiving a huge backlash from the rival companies, opposition lawmakers and civic groups, all of which are worrying over SK’s move to expand its influence in the telecom sector to the pay-TV segment.
SK Telecom said a recent decision by the Department of Justice in the United States to grant conditional approval between Charter and Time Warner Cable (TWC) is worthy of being benchmarked.
In a statement issued by the Federal Communications Commission (FCC), its chairman Tom Wheeler said: “An order recommending that the Charter-TWC transaction be approved has circulated to the Commissioners. As proposed, the order outlines a number of conditions in place for seven years that will directly benefit consumers by bringing and protecting competition to the video marketplace and increasing broadband deployment.”
The FCC regulates interstate and international communications by television and cable.
SK Telecom emphasized the FCC chairman’s remarks that the Charter-TWC deal will stimulate innovation and provide new choices for consumers. Charter is a major U.S.-based cable TV operator, while TWC is a major US broadcasting firm.
“Importantly, we will require an independent monitor to help ensure compliance with these and other proposed conditions. These strong measures will protect consumers, expand high-speed broadband availability, and increase competition,” said an SK spokesperson.
As Korean regulators usually collaborate with regulators in the United States and Europe in mergers and acquisitions deals, which need regulatory approval, the latest US announcement is expected to be used as a “reference” for the Korean authorities in setting up the procedures, which were stalled.
“If the SK-CJH deal is approved, then the merged unit will become a threatening force, which may steal some stakes secured by KT in related sectors,” Kim Hyun-yong, an analyst at E-Best Securities, said in a report to clients.
On a related note, the Seoul Southern District Court will start its first trial on the legal validity of the SK-CJH deal in June 3 after officials at KT and LG Uplus filed legal papers to the court asking for nullification of a shareholders meeting by CJH to approve SK Telecom’s proposal.