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SK Telecom Co., South Korea's top mobile carrier, said Monday that it had signed a deal to acquire a controlling stake in Hanarotelecom Inc., the country's No. 2 broadband provider and fixed-line operator.
The deal calls for SK Telecom to purchase a 38.89 percent stake in Hanaro for 1.09 trillion won (US$1.17 billion) from a consortium led by the American International Group and Newbridge Capital, the mobile operator said in a statement. If the deal is finalized, SK Telecom will become the largest shareholder in Hanaro with a 43.59 percent stake. SK Telecom already controlled 4.70 percent of Hanaro.
"SK Telecom would acquire management rights of the company after government permission procedures," the statement said. The deal is subject to regulatory approval.
SK Telecom expects the acquisition will help it diversify and strengthen its competitiveness by having access to broadband Internet, Internet-protocol television and fixed-line telephone services.
Hanaro, which has one-quarter of the country's broadband market, is also the second largest fixed-line telephone company after KT Corp. SK Telecom is the nation's largest mobile service operator, holding more than half of the country's over 40 million mobile phone users.
"SK Telecom's acquisition of Hanarotelecom will lead to greater market competition, which in turn will bring more benefits to customers," SK Telecom CEO Kim Shin-bae said. "Building on our strong expertise in convergence business, we will strive to create new global business models such as developing wired and wireless integrated service with Hanarotelecom," he said.
The deal comes less than a month after SK Telecom was chosen as the sole preferred bidder for the sale of the stake in Hanaro. SK Telecom had conducted due diligence on the company since Nov. 14.
On the back of the acquisition deal, SK Telecom has vowed to boost its presence in overseas markets. The mobile operator has recently sought to acquire a stake in Sprint Nextel Corp., the third-biggest wireless carrier in the United States. Company officials confirmed that SK Telecom came up with an investment proposal for Sprint Nextel in November. "No formal response yet from Sprint," said Ko Chang-kook of the company's public relations strategy team.
Company officials did not disclose details, but news reports said SK Telecom had joined a group that proposed a US$5 billion investment for Sprint Nextel. The group also includes U.S. private equity firm Providence Equity Partners.
The proposal is part of SK Telecom's efforts to expand its business in the United States. SK Telecom unveiled a plan in September to invest an additional $200 million to expand Helio, a high-end wireless venture with EarthLink Inc. that rents space on Sprint's network.
Helio, launched in 2006, has posted an average of over 30 percent subscriber growth per month, reaching 145,000 subscribers as of late September, according to SK Telecom. "We are seeking to expand our business into the United States, China, India, Indonesia and other countries with big markets," Ko said.
In August, SK Telecom bought a 6.6 percent stake in China Unicom to become the second-largest shareholder in China's No. 2 mobile operator, hoping the strategic partnership will help it make inroads into the Chinese market. SK Telecom has also invested in Vietnam and Mongolia.
SK Telecom's local rival, KTF is also pushing for business ventures overseas. KTF said Monday it has joined hands with Japan's top mobile phone firm, NTT DoCoMo to tap the Malaysian market. KTF and DoCoMo have agreed to invest US$100 million each for a combined 33 percent stake in U Mobile, Malaysia's newest third-generation mobile phone carrier, KTF said.
"The stake purchase will help us secure a foothold in the 3G communications market in Malaysia," KTF said. U Mobile is one of four local firms which were given a license to run the 3G mobile service in Malaysia.
KTF is South Korea's No. 2 mobile operator with over 31 percent of the nation's 41-million mobile phone users, followed by LG Telecom with 17.8 percent.
With the market reaching saturation point, the three companies have recently announced price-cutting schemes, such as the introduction of an inner-network discount, which could hurt their profits.
Analysts say the two major deals would trigger further consolidation in the country's telecommunications industry and spur more efforts to find growth overseas.
