SK Telecom on Sunday announced it has agreed to acquire South Korean cableco CJ Hellovision with a view to merging it with its fixed-line division SK Broadband.
The operator will initially pay 500 billion won (€398.2 million) for a 30% stake in CJ Hellovision currently held by CJ O Shopping. In a statement, SK Telecom said the deal allows it to acquire CJ O Shopping’s remaining 23.9% stake in CJ Hellovision at a later date through call and put options.
The transaction is expected to close in April 2016.
Upon acquisition of the stake, SK Telecom will push for a merger of CJ Hellovision and its fixed-line unit SK Broadband via a stock swap at a ratio of one CJ Hellovision share to 0.48 shares of SK Broadband.
Once the dust settles, SK Telecom will own 75.3% of the combined entity, and CJ O Shopping will own 8.4%.
"SK Telecom’s acquisition of [a] stake in CJ Hellovision, the leading player in the media industry, is expected to contribute to the advancement and convergence of the broadcasting and network infrastructure," said Hwang Keun-joo, executive vice president and head of strategic planning at SK Telecom.
As well as the addition of CJ Hellovision’s 4.1 million TV subscribers, SK Telecom said the deal is also expected to generate synergies in content sourcing.
Furthermore, SK Telecom and CJ O Shopping parent CJ Corporation plan to create two KRW50 billion investment funds, one that will invest primarily in media content, and another that will focus on IT start-ups.
The deal was announced at the same time as SK Telecom’s third quarter fina ncial results.
In the three months ended 30 September, SK Telecom generated revenue of KRW4.3 trillion (€3.4 billion), down 2.4% year-on-year. The operator attributed the decline to regulated cuts in interconnection fees and an increase in the number of postpaid mobile subscribers receiving discounts on their contracts.
The decrease in revenue drove an 8.6% year-on-year decline in operating profit, which came in at KRW490.6 billion. SK Telecom turned in a net profit of KRW318.8 billion, down 28.1% compared to Q3 2014.
SK Telecom ended September with 28.5 million mobile customers, up from 28.4 million a year ago. Of that total, 18.5 million are LTE subscribers, compared to 16.2 million a year earlier.
