SKT to invest 5 trillion won in content after CJ deal

Thursday, Dec 03, 2015

SK Telecom said Wednesday it will invest five trillion won ($4.29 billion) in developing media content through its proposed takeover of CJ HelloVision (CJHV), dispelling growing concerns that the deal may boost the company's dominance in the broadcasting sector.

"Diversification of content is the main reason behind our decision for the deal," Lee Hyung-hee, president of the company's network operations division, said in a press conference at its headquarters in central Seoul. "We are going to operate a converged media platform business within legal boundaries."

This is the first time the company announced its official position on the takeover of the nation's leading cable TV service operator. The deal has incited a strong backlash from second- and third-place mobile carriers KT and LG Uplus.

The two telecom companies have joined hands to oppose the deal, calling it a "monopolistic scheme" to disrupt the competitive landscape within the industry. They argue that the deal, if approved, will help the company expand its dominant position into broadcasting.

"We need to find a new growth engine amid fierce competition with foreign media platform providers," he said. "The SK-CJ deal is expected to boost synergy for both companies to create more diverse and quality content for customers."

Earlier last month, SK Telecom reached a deal to buy a 30 percent stake in CJHV for 500 billion won ($438 million). It previously said the move was part of its efforts to stop a war of attrition to attract more telecom subscribers, and seek competition for more quality content in the telecommunications, broadcasting and platform sectors. The deal will boost its strong drive to become what the company calls a "converged media platform provider."

On Tuesday, SK Telecom submitted documentation to the nation's top regulators ? the Fair Trade Commission, Korea Communications Commission and the Ministry of Science, ICT and Future Planning.

The deal, if approved, will allow SK Broadband, SK Telecom's wholly-owned subsidiary, to acquire CJHV before April next year.

Strong opposition from rival telecoms

KT and LG Uplus, however, stepped up their criticism following the press conference, arguing that SK Telecom is misleading customers to solidify its grip on the broadcasting industry.

"The latest deal has nothing to do with SK Telecom's vision to gain global competitiveness," LG Uplus said in a statement. "SK Telecom is pushing for a monopoly in various industries including telecom, content and broadcasting."

Last week, LG Uplus denounced SK Telecom in a press conference, calling the deal "illegal." It previously claimed the move will prevent fair competition stipulated by law, and therefore, the nation's top regulators should not approve the deal.

KT, which is the market leader in the paid broadcasting service market, also released a statement, claiming SK Telecom was "deluding" customers with the gimmick.

"KT and LG Uplus have not reached any takeover deals with cable TV operators to strengthen their competitiveness in the telecom sector," KT said in a statement. "The investment plan by SK Telecom is nothing more than a scheme for market domination."

KT previously called for relevant government bodies to closely examine possible disturbances that the deal will create in the market.