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LG U+ Decides to Acquire CJ HelloVision for 800 Bil. Won
Big Change in Paid TV Market in the Offing
LG U+ Decides to Acquire CJ HelloVision for 800 Bil. Won
  • By Kim Eun-jin
  • February 15, 2019, 09:47
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LG U+ will take over CJ HelloVision to expand its presence in the domestic pay TV market.

LG U+ has finally decided to take over CJ HelloVision to expand its presence in the domestic pay TV market.

The company’s board of directors convened on Feb. 14 to approve its plan to acquire 50 percent plus one share of CJ HelloVision from CJ ENM, which holds 53.92 percent (41,756,000 shares) of the cable TV operator, for 800 billion won.

Once the acquisition is completed, it will change the landscape of the paid TV market. Currently, LG U+’s IPTV service ranks fourth in the paid TV industry with a market share of 11.41 percent, while CJ HelloVision’s cable TV service ranks third with a share of 13.02 percent. The two companies’ combined share amounts to 24.43 percent, second only to the alliance of KT Corp. and KT Skylife that has a 30.86 percent share.

In the first half of last year, KT ranked first with a 20.67 percent share in the pay TV market, followed by SK Broadband with 13.97 percent. 

Attention is now focusing on whether LG U+’s acquisition of CJ HelloVision will pass the Fair Trade Commission's review.

Media industry watchers say that LG U+’s acquisition of CJ HelloVision will trigger M&As among cable TV and IPTV companies. KT Corp. is interested in acquiring D’Live, a cable TV operator, while SK Telecom, the parent company of SK Broadband, is pushing to take over another cable TV operator T Broad.

If KT acquires D’Live, which has a 6.45 percent market share, it will be able to consolidate its top position with a 37.31 percent market share. If SK Telecom takes over T Broad, which holds a 9.86 percent market share, SK Broadband will closely trail LG U+ with a combined market share of 23.83 percent.

The reason why big changes are expected in the pay TV market is that Korea’s three major mobile carriers and cable TV operators believe that they can create synergies through M&As. The three major mobile carriers are making every effort to secure future growth engines in the fields of media and content. At present, over the top (OTT) services are threatening old players in the pay TV market. In particular, overseas operators with enormous capital power are actively expanding their presence in the Korean market. Korean subscribers to global OTT service provider Netflix have surpassed one million in one year.

The three Korean mobile service providers are also network operators who provide networks to Netflix and YouTube, but they do not collect proper fees from them. The three companies are trying to expand their size through M&As in order to cope with foreign companies such as Netflix. They are also striving to create original content.

LG U+ will soon submit its plan to acquire CJ HelloVision to the Fair Trade Commission (FTC). The biggest issue in the FTC's review is the concentration of market power. In 2016, the FTC turned down SK Broadband’s plan to acquire CJ HelloVision on the grounds that the merger will seriously impede fair competition in some regions of the country.

The FTC is also likely to look at market concentration by regions this time as well. However, the market share calculation method has changed since then. In 2016, market concentration was calculated under the assumption that operators of analog cable TV, digital cable TV, satellite broadcasting, and internet broadcasting (IPTV) all compete in the same broadcasting market. However, the analog cable TV segment will be excluded from the market share calculation this time. As a result, CJ HelloVision, which provides analog and digital cable TV services, may have a lower market share after merger than in the past.

Some broadcasting industry experts pointed out at the time that the FTC's disapproval of the merger between SK Broadband and CJ HelloVision was unreasonable. This past experience is also a factor that will affect the reviewing process. Back then, critics argued that the FTC’s decision prevented a proper restructuring of the broadcasting industry at a time when cable TV was falling in status.