SK Telecom poised to control Hanarotelecom

19 November 2007

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Seoul – SK Telecom looks set to control Korea’s Hanarotelecom after being named as the sole preferred bidder of AIG/Newbridge consortium’s 39.36% stake in Hanaro.
The deal needs regulatory and other approvals, which may take until March 2008. SKT already owns a 5% stake in Hanaro, Korea’s second biggest fixed-line player.
SKT, Korea's top mobile operator with 22 million customers, joined the race after Australia’s Macquarie Bank launched a bid.
Hana TV, the telco’s pre-IPTV service, is a key attraction for SKT; Hana TV had 660,000 subs at the end of October and is shooting for 800,000 by year-end. Hanaro has about 3.7 million broadband customers.
The enhanced scale would bring cost savings and boost earnings and margins at SKT as well as increasing customer growth and reducing churn, according to analysts. However there could be a downside: SKT “might be overpaying - if you beat private equity (i.e. Macquarie and Carlyle) for an asset, you're really paying a premium,” said Media Partners Asia Executive Director Vivek Couto.
Local press reports speculate the deal price is around W12,500 per share (US$13.63), a 15% premium to the share price at the time of the announcement, implying SKT would need to pay W1.14 trillion ($1.2 billion).
In spite of ARPU growth, both Hanaro and KT are struggling to make money from their pre-IPTV TV portal services, and KT continues to lose broadband market share to LG Dacom and cable system operators, MPA notes. LG Dacom plans to enter the TV portal business shortly, targeting 200,000 subs by end-2008, before expanding into a fully-fledged IPTV service with terrestrial retransmission when permitted by regulations.
Couto contends the competitive Korean broadband market is badly in need of scale in the lead up to the anticipated launch of full IPTV services in the second half of 2008.