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By Jun Ji-hye
SK Telecom, KT and LG Uplus are engaged in a heated competition to acquire cable television operators to expand their presence in the rapidly-growing media market and make up for the declining profitability of their wireless services businesses, analysts said Wednesday.
The move comes as telecom companies' media business based on their internet protocol televisions (IPTV) has appeared to offset falling sales and operating profits in their telecommunication business.
According to the third-quarter earnings reports announced by the three mobile carriers, aggregate sales in their IPTV units stood at 935 billion won ($822 million), up by 23.1 percent from a year ago.
Analysts said telecom firms are expected to seek more profits through the active acquisition of cable TV operators.
Currently, the nation's largest cable TV operator CJ Hello and the third largest D'Live are on the M&A market.
LG Uplus has been actively moving to take over CJ Hello, while SK Telecom and KT are expected to engage in a fierce competition to acquire D'live.
The fourth largest cable TV operator CMB and the fifth largest Hyundai HCN are also said to be potential targets for M&A deals.
"Considering government regulations and synergy effect, CJ Hello is the most attractive target for LG Uplus," said Choi Nam-gon, an analyst from Yuanta Securities. "There will be an M&A announcement within the fourth quarter of this year."
LG Uplus has virtually acknowledged its willingness to take over CJ Hello. An LG Uplus official said during a third quarter earnings conference call, "Work to take over a cable TV operator is still ongoing, but there are a lot to be reviewed."
Data provided by the Ministry of Science and ICT showed that KT took a 20.21 percent market share in the subscription TV market last year, while SK Broadband and CJ Hello took 13.65 percent and 13.1 percent, respectively. LG Uplus and KT Skylife had 10.89 percent and 10.33 percent.
Subscription-based TV services refer to those provided by cable, satellite TV and IPTV operators.
Once LG Uplus completes the acquisition of CJ Hello, it will become the No. 2 subscription TV service provider after KT Group that encompasses KT and KT Skylife. This raises the possibility for KT and SK Telecom to acquire another cable TV operator.
"Once a certain telecom company acquires a cable TV operator, other telecom firms will also move to take over cable TV operators," said Kim Joon-seop, an analyst from KB Securities.
KT has already begun to conduct a due diligence on D'Live, while SK Telecom has been rumored to begin its within this month.
D'Live currently holds a 6.54 percent market share. If KT Group acquires D'live, KT Group's share will increase to 37.08 percent, which will solidify its No. 1 position in the subscription TV market.
During its third quarter earnings conference call, a KT official said, "We are considering acquiring a multiple system operator in a bid to overcome growth stagnation of KT Skylife," adding that details have yet to be decided.
