South Korea’s smallest mobile operator LG Uplus has reportedly claimed that incumbent SK Telecom’s planned merger with CJ Hellovision is illegal, calling it an attempt to monopolise the telecoms and broadcasting sectors. The deal would combine the country’s second and third largest pay TV operators.
South Korea’s smallest mobile operator LG Uplus (KRX:032640) has reportedly claimed that incumbent SK Telecom’s (NYSE:SKM) planned merger with CJ Hellovision is illegal, calling it an attempt to monopolise the telecoms and broadcasting sectors.
In November, SK Telecom agreed to pay an initial W500bn (US$431.6m) for a 30% stake in CJ Hellovision, the country’s largest cable TV and second largest pay TV operator, from CJ O Shopping. The telco has the option to acquire the home shopping channel’s remaining 23.9% stake for W500bn in the two years beginning April 2019. Both CJ Hellovision and CJ O shopping are units of conglomerate CJ Corporation.
Upon closing, expected to take place in April 2016, SK Telecom will seek to merge its fixed-line unit SK Broadband with CJ Hellovision. SK Telecom would own 75.3% of the merged entity, while CJ O Shopping would own 8.4%.
LG argued in an official statement that the planned merger “must not be tolerated”, the Korea Times reported.
Citing a law firm, LG contended that the deal violates local fair trading laws, saying it “is the norm that competition among numerous players is more beneficial to consumers than merger deals among conglomerates”.
As South Korea’s second and third largest pay TV operators respectively, CJ Hellovision and SK Broadband would together create a stronger competitor to market leader KT Corporation.
In its September statement announcing the deal, SK Telecom said it would aim to transform the merged company into the country’s leading next-generation media platform player with hybrid cable TV and IPTV business models.
SK Telecom and CJ Corporation have also agreed to set up two W50bn (US$43.2bn) funds, of W25bn each, to invest in media content and IT start-ups.
Following the deal announcement, Moody’s affirmed SK Telecom’s A3 issuer and senior unsecured bond ratings, saying it expects the telco will “maintain its strong market position and its financial profile will remain in line with the A3 rating category over the next 12-18/ months”.
LG Uplus was not immediately available for comment.
