Korea Telecom absorbs mobile unit to take on SKT
Published: 21 January, 2009
The Korean telecoms market is consolidating, with Korea Telecom, the largest fixed line operator, acquiring full control of its 54%-owned mobile arm, KTF. This will increase its global reach as well as use more effective fixed/mobile bundling to improve its competitiveness with mobile leader SK Telecom, which has been far more aggressive on the international stage.
KTF is also partly owned by Japanese carrier NTT DoCoMo, which has an 11% stake, and will gain $253m in bonds exchangeable into KT stocks. This will reduce its overall stake to about 2.5% and will keep foreign ownership of the combined entity below the 49% that Korean law allows.
As Korea's mobile and broadband markets approach saturation, bundles of fixed, mobile, broadband and television services are increasingly the way to lure customers for KT, SKT and third player LG Telecom. SKT has blazed the trail in improving its fixed/mobile platform, by acquiring SK Broadband (formerly Hanaro Telecom), and also in gaining influence and revenue streams beyond its own overcrowded territory, with ventures in the US and other parts of Asia.
The KT deal will create a company with annual sales of about KRW19 trillion ($14bn). KT's new CEO, Suk-Chae Lee, said in a statement that "this merger is not an issue concerning just KT alone, it's a matter of survival for the entire Korean IT industry".
SKT is likely to oppose the merger before the Korean Communications Commission next week, though with 50% market share its protestations could fall on stony ground. CEO Lee commented: "I don't know what the problem is. KT has been struggling as the fixed line telephony market continues to diminish, and the company's profit is just half the level of what the number one wireless carrier earns."
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