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(2nd LD) LG Uplus strikes deal to buy majority stake in cable TV operator CJ Hello

16:10 February 14, 2019

(ATTN: REVISES headline, lead; UPDATES with CJ ENM's comments in paras 7-8, share price at bottom)
By Kim Eun-jung

SEOUL, Feb. 14 (Yonhap) -- South Korea's No. 3 mobile carrier LG Uplus Corp. said Thursday that it has struck a deal to buy a majority stake in leading cable TV operator CJ Hello to bolster its presence in the media and content market.

The board of directors of LG Uplus approved the purchase of a 50 percent plus one share stake in CJ Hello from CJ ENM for 800 billion won (US$711 million). CJ ENM is a unit of food and entertainment conglomerate CJ.

The stake acquisition will be confirmed in a shareholder meeting next month and needs approval from the corporate watchdog Fair Trade Commission (FTC), which has up to 120 days to review its request.

(2nd LD) LG Uplus strikes deal to buy majority stake in cable TV operator CJ Hello - 1

If CJ Hello's acquisition is finalized, LG Uplus will become the nation's second-largest pay TV operator with a 24.4 percent market share, up from the current fourth place.

LG Uplus said CJ Hello's acquisition is expected to raise its competitiveness in the pay TV market in the new era of 5G and vowed to develop various content, such as augmented and virtual reality.

"The stake acquisition will serve as the first step to improving the quality of the nation's broadcasting market," Lee Hyuk-ju, the firm's chief financial officer, said in a release. "We expect to create new growth momentum with a synergy effect from combining media and telecommunication."

CJ ENM said the stake sale is expected to provide necessary funds for its new growth engines, including content business and digital commerce.

"As media and telecommunication companies are getting bigger through M&As and reinforcing Internet platforms to target the global market, we will focus on improving the quality of content targeted for the global audience," CJ ENM said in a statement. "We will continue to make investments to become one of the top-tier entertainment and merchandising companies."

The company's 2018 earnings improved slightly on the back of increased sales in its home and media division, mostly led by Internet Protocol television (IPTV).

In November, LG Uplus began offering the global online streaming TV service Netflix on its set-top boxes to provide a wider range of video content, the first among the nation's telecommunications companies.

As a result, the number of its IPTV subscribers jumped 13.5 percent to 4.02 million last year, surpassing the 4 million mark for the first time.

SK Telecom Co., the nation's No. 1 mobile carrier, tried to buy CJ Hello in 2016, but talks fell through as the FTC rejected the deal over concerns of hampering fair competition.

This time, optimism runs high for LG Uplus' takeover as it is the smallest mobile carrier and there is a growing consensus over strengthening the industry's competitiveness in line with the fast changing global media landscape.

In a recent media interview, FTC chief Kim Sang-jo expressed regret over his agency's rejection of SKT's merger and acquisition (M&A) request, hinting at a positive result for LG Uplus.

Market watchers say LG's much-watched M&A is expected to accelerate top two mobile carriers' bid to buy smaller cable TV operators.

Korean telecommunication companies have been looking for new growth engines in the media and content segment as global online streaming companies, such as Youtube and Netflix, have been flexing their muscle here.

SK Telecom is reportedly interested in acquiring t-broad and KT has been eyeing D'LIVE to expand their TV market share.

On Thursday, shares of LG Uplus rose 1.7 percent to 14,950 won, while CJ ENM fell 1.55 percent to 216,400 won. The acquisition agreement was announced before the market closing.



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