Chey Tae-won, CEO of SK Group [Photo By Yoo Dae-gil = dbeorlf123@]
SK Telecom, the flagship of South Korea's third largest conglomerate, SK Group, gained a toehold to become a media giant Friday after shareholders of CJ Hellovision, a major cable channel operator, endorsed a merger with an Internet protocol television subsidiary of the country's top mobile carrier.
SK Telecom has offered to buy CJ Hellovision (CJH), a unit of retail giant CJ Group, with a plan to merge it with SK Broadband. The result of the shareholders meeting will be invalidated if regulators reject the one trillion won (810 million US dollars) deal.
The merger, if approved by the government, is seen as a game changer in South Korea's media industry as it will help SK Telecom expand its business portfolio into mobile networks and entertainment content together.
Rivals KT Corp and LG Uplus have called foul over the deal, insisting it would allow SK Telecom to increase its dominant position in the mobile network industry. LG Uplus CEO Kwon Young-soo has argued the merger would cost more for consumers when they watch SK's pay-TV programs.
US proxy-voting advisory firm Institutional Shareholder Services has sided with KT and LG, expressing concern about a possible "dilution risk", while some critics said that competition in the pay TV and mobile network markets may pose a risk to the performance of the merged entity.
SK Telecom, however, has insisted it could compete better with global content players such as Netflix, the US-based web-streaming giant which started its full service in South Korea in January.
International credit rating agency Fitch said earlier that the proposed takeover is generally good for SK Telecom because it can strengthen its media competitiveness, bundling ability and operating efficiency.
"Fitch believes the acquisition of CJH will create immediate synergies by expanding SK Broadband's pay-TV subscriber base. This will boost revenue from its media business with additional sales of bundled packages and other media products," it said.
Fitch also said SK Telecom is likely to improve its operating efficiency with better content sourcing power and economies of scale.
Last year SK Telecom's net profit fell 15.8 percent on-year to 1.5 trillion won ($1.21), compared with a net profit of 1.7 trillion won a year earlier, due mainly to losses from an equity investment in its affiliate, SK Hynix. Sales fell due to discounts in subscription fees and the abolishment of enrollment charges on new clients.
The proposed merger comes as the group is seeking to bolster next-generation businesses for sustainable growth, under its troubled boss Chey Tae-won who sparked a fresh scandal in January over his confession about an extramarital affair and a love child, months after he was released from prison.
Chey resigned from the executive board of all SK units in March 2014, after receiving a four-year prison term for embezzling company funds. He was pardoned last year after serving 31 months out of his 48-month prison sentence, but the exact date for his official comeback has not yet been disclosed.
South Korea's family-oriented business conglomerates or chaebol have all been repeatedly entangled with corruption scandals. However, their leaders have customarily been pardoned or released on parole because of their past economic contributions and potential future investments.
아주경제 임장원 기자 = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
