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THE INVESTOR
January 29, 2020
Big Reunion

Deals

Gov‘t approves merger of LG Uplus-CJ Hello merger

  • PUBLISHED :December 15, 2019 - 22:50
  • UPDATED :December 15, 2019 - 22:55
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The merger between South Korean mobile carrier LG Uplus Corp. and cable and budget phone operator CJ Hello Co. received final approval from the government on Dec. 15 in a development that could lead to more investment and growth in the local telecom and broadcasting sector.

The conditional permission follows a detailed review of the market impact of the transaction, with emphasis placed on the benefits to the industry as a whole and improvements in rights and convenience for consumers, the Ministry of Science and ICT said. It said the merger could contribute to the lowering of communication costs down the line.

It said LG Uplus, the No. 3 mobile carrier, will move toward completing the merger with the nation‘s largest cable TV provider this week.

Lee Tai-hee, deputy minister in charge of the Ministry of Science and ICT‘s Office of Network Policy holds a briefing on the LG UPlus-CJ Hello merger in Seoul on Dec. 13, 2019. (Yonhap)


Related:
LG Uplus to invest 2.6 tln won after takeover of No. 1 cable TV operator

LG Uplus' board approved the move to acquire a 50 percent stake plus one share of entertainment giant CJ ENM, which controls CJ Hello, in mid February, with the company purchasing the shares for 800 billion won (US$683 million) on March 15. The Fair Trade Commission, the country‘s antitrust watchdog, gave its conditional consent last month.

The latest move means that the country‘s top four budget phone companies, who rent networks from the country’s three mobile carriers -- SK Telecom Co., KT Corp. and LG Uplus -- are all affiliates of these companies. This translates into 63 percent of budget phone users being customers of the big three, up from little over 42 percent.

Lee Tai-hee, deputy minister in charge of the ministry‘s Office of Network Policy said the decision can be seen as an easing of existing state regulations that in the past restricted mobile network operators like LG Uplus to owning just one mobile virtual network operator (MVNO).

On the conditions set, the senior official said LG Uplus, in the telecom field, will be obligated to offer future 5G and long term evolution (LTE) wireless broadband communication services to all MVNOs in the country and give support to such companies wanting to provide affordable 30,000-40,000 won data plans to consumers. He stressed that LG Uplus will be barred from taking any discriminatory action against other virtual operators and must not compel existing users of CJ Hello’s cheaper services to switch to more expensive data options.

LG Uplus, moreover, has pledged to push forward a plan to offer high speed internet coverage to rural areas by 2022.

In regards to broadcasting areas, LG Uplus has vowed to maintain and bolster current channels that serve various interests and regions and maintain the so-called 8-level vestigial sideband, which provides people who only signed up for analog broadcasting with digital content.

The company will also be closely watched to prevent it using its dominant market presence to impose unfair conditions on program providers such as home shopping channels.



The deputy minister said that since the merger is the first time an internet protocol television company has bought a system operator, the government wants the arrangement to expand the broadcasting ecosystem and foster the creation of new content.

LG Uplus stated last month that it plans to inject 2.6 trillion won in the next five years to build up its content competitiveness and 5G-related fields like augmented reality and virtual reality.

LG Uplus with CJ Hello as its affiliate will become the second-largest pay TV service provider, with a market share of around 25 percent, trailing only rival KT Corp. and its affiliate KT Skylife Co., who hold a little over 31 percent.

Lee said that the ministry plans to keep close tabs on LG Uplus so it meets the government‘s conditions for three years.

“Failure to meet the requirements will result in administrative action, fines, restrictions on advertisements and even a re-evaluation of the approval,” Lee emphasized.

Existing CJ Hello partner companies will be able to maintain their ties for three years so as to reduce any concerns they and their workers may have, according to the deputy minister.

Lee added that the ministry is expected to review the merger plan between SK Broadband Co., the country’s second-largest cable TV company, and broadcasting and communication service provider t-broad early next year.

By Park Ga-young and newswires (gypark@heraldcorp.com)

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