Acquisition by SK of Thrunet New Variable of Communications Market

‘‘K league of telecommunications market’ has been started.’

As the competition of communication companies that fell silent due to World Cup, has been heated, the communication market has shown a sign of sudden change.

Thrunet decided to sell the business of dedicated lines including the business right to SK Global for KRW 370 billion on July 5. As Korea Power Engineering Company (KOPEC) made the decision of failed bid for PowerComm’s equity sales, bidders such as Dacom and Hanaro Telecom are busy to calculate the gain and loss.

▽Expanding area of SK Telecommunication business 〓As SK has expanded the business of telecommunication rapidly, a threat of competitors has increased.

SK Telecom became the large shareholder (11.34%) of KT in May and then acquired Lycos Korea. Also, it could occupy even the market of wire communication with the business of the exclusive lines through SK Global. In addition, it planed to advance the business of digital cable TV and digital satellite audio broadcasting (DAB).

To help the business diversification of SK Global and to avoid the burden by the expansion of SK Telecom business, SK represented SK Global for acquisition of Thrunet’s exclusive line business

Amalgamation of Hanaro Telecom and Thrunet would not be done due to Thruenet business acquisition of SK Global. Accordingly, SK Telecom will be able to strengthen a firm position with KT which SK Telecom is the large shareholder.

Shin Yeong-Cheol, the head of public information of SK Telecom said “New business is the effort for existence to maximize a synergy effort of mobile communication business”.

▽Failed bid of PowerComm〓 The bidding for PowerComm privitisation was failed again.

Gang Dong-Seok, the president of KOPEC announced in a bull session with reporters on July 5, “the bidding prices of bidders are lower than the estimated price of KOPEC or bidders didn’t meet the payment conditions. So, we decided to fail the bidding”. Participating in this PowerComm bidding, Dacom Consortium, Hanaro Telecom Consortium and Thrunet’s conditions didn’t meet the expectation of KOPEC.

KOPEC plans to determine the sales measure through re-bidding or private contract within 10 days. Mr. Gang said “this sales work will not be carried over to next year” He spoke out that all 30% of PowerComm’s equity will be sold out within this year.

Either Dacom or Hanaro Telecom which fails in the PowerComm bidding, will have the limitation of size in domestic communication market. Accordingly, the close competition will be fought out between communication companies for PowerComm privatization.

Tae-Han Kim Ja-Ryong Koo freewill@donga.com bonhong@donga.com