Unjustified Decision
SK Telecom announced on July 5 that the Fair Trade Commission (FTC) did not accept its application for a merger between CJ HelloVision and itself that had been filed on December 1 last year. According to SK Telecom, the FTC said that the merger could strengthen SK Telecom’s dominant position in the broadcasting market.
The FTC’s decision is opposite to the stance of the South Korean government. President Park Geun-hye has said over and over that the government will assist in proactive restructuring of enterprises. The decision is opposite to the global trend of media companies, too. These days, a large number of such companies around the world are engaged in M&A in order to better cope with rapid changes in the industry.
At present, KT has a share of 29.4% in the domestic paid broadcasting market while the market share of CJ HelloVision, the runner-up, is merely 14.8%. Even if the merger is permitted and CJ HelloVision is combined with SK Broadband, a subsidiary of SK Telecom, the market share of the company resulting from the merger is 26%.
Not a few in the industry are in panic. SK Telecom said the FTC’s determination is shocking news thwarting its plan to contribute to the development of the paid broadcasting market by means of large-scale investment in content and networks after the M&A. “The decision is completely unconvincing in view of the future of the cable TV industry,” CJ HelloVision commented, adding, “This determination is likely to hinder the preemptive and voluntary restructuring of the cable TV industry that is losing its competitiveness nowadays.”
Cable TV channels in South Korea can have subscribers only in certain regions, and as such, they cannot realize the economy of scale and are having a hard time competing with IPTV service providers, which can do business nationwide. Besides, with the number of cable TV subscribers plummeting, those channels are feeling a sense of crisis and regarding restructuring as their only breakthrough.