KT-KTF merger sets stage for new battle

13 May 2009

Depending on whom you ask, the merger between incumbent KT and mobile subsidiary KT Freetel (KTF) is either a formula for revival of the country\'s saturated telecom market or a step back toward monopoly.

Industry regulatory Korea Communications Commission (KCC) and competition watchdog Fair Trade Commission (FTC) gave the green light for the merger in March.

KT said it was needed to boost its transformation into a global operator and to drive fixed wireless convergence in Korea.

\'\'This merger is not an issue concerning KT alone. It\'s a matter of survival for the entire IT industry,\' commented KT Corporation\'s new president Suk Chae Lee as he pledged to restore KT\'s industry leadership and lead its growth.

Lee was appointed president of KT January 14 following the resignation of Joong Soo Nam amid bribery investigations in early November.

Ironically, Lee was the information and communications minister in 1996 who granted a mobile license to KT Freetel in order promote competition by separating KT\'s fixed-line and mobile businesses.

Inevitably, rivals SK Telecom and LG Dacom have mounted fierce opposition to the merger, claiming it will hinder competition.

The new KT will start off holding 90% of the fixed-line market, 45% of broadband and 30% of the mobile market.

KT says that overall revenues have been slipping as SK Broadband and LG Dacom have steadily eaten into its fixed-line subscriber base. Its operating income has halved in recent years and is now much less than SKT\'s.

The FTC cleared the merger unconditionally, but the KCC has insisted KT improve access for competitors to its ducts and telephone poles, shorten the timeframe for PSTN-VoIP number portability and open up its wireless internet network.

KT has said the impact of these conditions will be \'limited\'.

SKT sources say that they have no plans currently to follow KT\'s example and merge their mobile and fixed-line businesses, but in the prevailing tough environment the SK and LG Dacom groups will face heavy pressure to consolidate their own operations.

The SK group has recently appointed Man-won Jung to head up SKT. Jung has already announced aggressive plans to lead Korea\'s IT industry and so the scene is set for a fierce battle with Lee and KT after the new KT is inaugurated June 1.

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