Printer Friendly

LG Uplus takes on SK Telecom in M and A battle.

LG Uplus, the country's smallest telecom company by market share, is taking on leader SK Telecom for corporate volume growth because the two are moving quickly to take advantage of external growth through acquisition deals to retain momentum.

The goal is clear; however, Korea's three telecom companies including the No. 2 Korea Telecom (KT) are using different methodologies.

LG Uplus is following a global trend aiming to attain competitive benefits in its core businesses.

Its CEO Kwon Young-soo claims that acquisitions in the telecom sector should be regarded as horizontal mergers simply because the entities going for mergers and acquisitions (M and As) are operating in the same industry.

In the majority of developed and developing countries, M and As in the telecom sector have become a necessity, and such domestic transactions could help LG cut expenses, achieve increased market share and accomplish market control.

"Can we up our position domestically through M and As? We are seeking ways to strengthen our business portfolio within our telecom infrastructure," said a spokesman.

In January this year, LG Uplus, the telecom affiliate of LG Group, was rumored to be purchasing CJ HelloVision (CJH), surprising the market given the latter's size. CJH is the country's largest pay TV provider. While LG later denied the plan, market analysts say it was still interested in acquiring CJH.

"It's quite challenging for us to generate profits from investing in fifth-generation (5G) networks," Kwon told reporters at this year's mobile technology fair in Spain.

Market leader SK Telecom, which controls about 50 percent of the domestic market, is reaching out to new territories.

Unlike LG Uplus, which looks at vertical integration focusing on core businesses, SK Telecom is seeking business diversification. It earlier said it was planning to acquire ADT Caps, Korea's leading security platform provider.

"The key question is how far should we extend outside the core and what are the future prospects and economies of this. We have been doing well in our core business. SK Telecom plans to use our right to play in adjacent markets given our assets and capabilities," said an official.

SK Telecom has the most stable cash-generating structure, which in part stems from the significant contribution of its memory chip affiliate, SK hynix. SK hynix is the world's second-biggest memory chipmaker with SK Telecom holding a 20.7 percent stake.

"Regarding the issue of what's next for us, SK Telecom CEO Park Jeong-ho seems to be thinking about this question: what steps must it take to reassure regulators regarding the long-term implications of any deal. That makes sense," said a senior stock market analyst at a U.S.-based investment bank in Seoul.

SK Telecom has recently created divisions aimed at supporting local startups and ventures that won't saturate the telecom sector. Another interesting move is the possibility of allowing network providers to use SK's telecom infrastructure for improved cash-flow.

In contrast, KT is having difficulties in catching up with its two rivals as the telecom's management is sending out conflicting opinions on its recent plans to change the firm's controversial management system with its union, limiting chances for external growth.

KT was privatized in 2002; however, calls are high for it to be renationalized for management efficiency and to better prepare for its "next acquisitions."
COPYRIGHT 2018 Asianet-Pakistan
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2018 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:The Korea Times News (Seoul, Korea)
Geographic Code:9SOUT
Date:Mar 18, 2018
Words:638
Previous Article:Game developers expand workforces in AI.
Next Article:KT and G, AmorePacific stress overseas expansion at shareholder meetings.
Topics:

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters