By Lee Min-hyung
SK Telecom, the nation's largest mobile carrier, said Monday it has reached a deal to buy CJ HelloVision, the Internet television service affiliate of CJ Group, to expand its presence as a converged media platform provider.
Under the takeover deal, SK Telecom will acquire a 30 percent stake in the cable television service provider for 500 billion won ($438 million).
The move comes as the nation's top mobile carrier has been pushing to cut their reliance on the saturated telecom market and tap into the hybrid media platform business which includes telecommunications, cable TV and Internet Protocol TV (IPTV).
"SK Telecom has been aggressive in turning its telecom-centered business platform into a more diversified place to provide total media solutions," an SK Telecom official said. "The latest deal is our first step to become the nation's leading media platform business operator."
Following the deal, SK Broadband, SK Telecom's wholly-owned subsidiary, will merge with CJ HelloVision by April next year, SK Telecom said in a statement.
SK Telecom will emerge as the nation's No. 2 TV broadcasting platform provider in terms of the number of paid broadcasting service subscribers. CJ HelloVision has some 4.2 million subscribers for its cable TV service while SK Broadband holds some 3.3 million IPTV subscribers.
Combined subscribers for the paid broadcasting services will exceed seven million, coming close to KT's eight million subscribers. KT, the nation's second-largest mobile carrier, has so far dominated the paid broadcasting market here.
Market analysts said the latest deal will not be a massive profit model for SK Telecom, as the market has limited growth potential.
"The deal will allow SK Telecom to strengthen its grip on the broadcasting business," said IBK Investment and Securities analyst Kim Jang-won. "But it is unlikely that KT subscribers will make sudden decisions to change their media platform provider due to the latest takeover deal."
He said the domestic media platform business is not affected by economies of scale, which means SK Telecom will not suddenly hold bargaining power backed by CJ HelloVision's millions of subscribers.
SK Telecom will also benefit from CJ's knowhow on its content business," he added. "Taking advantage of the content-producing expertise of CJ E&M, entertainment affiliate of CJ Group, SK Telecom will also be able to provide more quality broadcasting service."
Yuanta Securities analyst Choi Nam-gon said, "As the market becomes an oligopoly of the two media platform service giants, expectations are that it will relieve excessive market competition."
The latest deal will bring positive effects to the market, as the two companies are expected to improve the quality of their service, not foster more competition, he said.