SK Broadband, a Korean ultra-high speed Internet and IPTV (Internet TV) service provider, held an extraordinary general shareholders meeting on May 6th, and resolved to return to its original plan to become a 100% subsidiary of SK Telecom.

Back in March, SK Telecom offered to swap its shares with SK Broadband's at a rate specified, or to buy out SK Broadband shareholders for KRW 4,645 per share. The company currently owns 50.56% of SK Broadband, which will voluntarily delist itself once the acquisition is completed. 

SK Telecom is spending over KRW700 billion (USD640 million) to make the company its wholly-owned subsidiary, to boost the competitiveness of its triple-play bundles of mobile, ultra-high speed Internet and IPTV services. For example, to sell more monthly mobile plans (ranging KRW50,000~60,000), the prices of ultra-high speed Internet or IPTV service included in the bundle should be low. However, for SK Broadband, a listed company, profits take priority over anything else, which leaves little room to be flexible in pricing.   

Mr. Yong-Hwan Lee, CFO of SK Telecom, noted that, "So far, SK Telecom and SK Broadband have been working, not as one corporate or two, but as one and half corporate, as in a three-legged race. And this has put quite a lot of restrictions on their growth in the competitive market."

He also highlighted that, "This acquisition can especially help to reduce resources required for each company's contents sourcing, and build more buying power. We expect the acquisition will accelerate SK Telecom's media business growth and improve its wired/wireless marketing efficiency."   

For SK Broadband, the long-time runner up to market leader KT in the Korean wired communication (ultra-high speed Internet) market, being able to leverage the nationwide distribution network established by SK Telecom, No. 1 in the Korean wireless market, must have been essential to beat KT. KT and LG U+, both with their own wired AND wireless business divisions, have been at a greater advantage in promoting bundles of wired/wireless service.   

A director at KT noted "If SK Telecom uses aggressive marketing strategies in promoting their ultra-high speed Internet and IPTV, taking advantage of its nearly-unbeatable competitiveness in the wireless communication market, the entire communication market will be overheated."