An attempted M&A deal between SK Telecom and CJ HelloVision fell apart. The deal has been reviewed for over seven months - first by the Fair Trade Commission (FTC) and then finally by the Ministry of Science, ICT and Future Planning (MSIP), the final decision maker, which disapproved the combination of businesses.
As a result, not only initiatives that have been actively planned for reforming the conventional broadcasting & communication market, but also cable TV industry’s efforts to find ways out through M&A deals have all been put on hold. Also partnerships between the communication and broadcasting industries as well as integration between the industry and ICT will also be thwarted. The FTC will likely face criticism that the decision was a reverse discrimination that goes against the trend in the global broadcasting & communication market that promote aggressive M&A transactions for market expansion.
The FTC announced on the 18th that in order to eliminate the risk of restricting competition, it decided to disapprove the proposed M&A deals: acquisition of CJ HelloVision by SK Telecom and merger between SK Broadband and CJ HelloVision. It explained the deals could substantially restrict competition in the relevant market, including paid-in TV service, mobile communication retail/wholesale, etc
With respect to how to define markets, the most controversial issue, the FTC explained “CJ HelloVision has 23 broadcasting regions, and cable TV service providers have different market shares and service rates in each broadcasting region. So the competition occurs within the region.
Serious back blast is anticipated. Much to the disappointment of cable TV service providers who were seeking ways to reform the market and stay competitive through M&A, potential M&A seekers like other telco operators are now all turning their attention away.
For SK Telecom, it became inevitable to revise the schedule of platform expansion, enhancement of content support, etc. which were previously planned. CJ HelloVision also has to move on and find an alternative way to stay competitive.
In the paid-in TV service market, IPTV will continue to be #1 sector. KT has nearly 30% of market shares, and it, along with its subsidiary Skylife, will remain as a leader in the market for a while. SK Telecom will have to focus on presenting wired and wireless integrated solutions in partnership with SK Broadband, in order to expand its paid-in TV subscriber base.
To deal with this bad news, the cable TV industry is likely to bring the ideas of ‘bundling’ with mobile service back on the table while continue to look for M&A opportunities with other cable TV service provider.
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