KT to merge with its mobile service unit to compete with rivals

(ATTN: ADDS backgrounds in paras 7-8, last three paras)
SEOUL, Jan. 20 (Yonhap) -- KT Corp., South Korea's largest phone and Internet
service provider, said Tuesday it plans to merge with its mobile operator to
better compete with local rivals such as SK Telecom Co.
KT controls 90 percent of the country's telephony services and more than half of
its 12 million broadband Internet subscribers. KTF Co., the nation's
second-largest mobile phone operator, has 14.36 million subscribers, accounting
for 31.5 percent of the nation's mobile service market.
The proposed merger was approved by the board of directors earlier in the day.
KT offered 0.719 of its stock for each KTF share, around 1.7 percent lower than
KTF's closing price on Tuesday. KT plans to complete the merger in May.
"The merger is not just an issue for KT alone, but also for South Korea's IT
industry to get out of its slump," said Lee Suk-chae, who was appointed last week
to head South Korea's top fixed-line and broadband operator.
"We need to take fast, aggressive action in order to survive in global
competition," he said, noting that South Korea's IT industry can be reinvigorated
through KT's leadership and merger with KTF.
KT reported sales of 11.9 trillion won (US$8.67 billion) and 967.5 billion won in
net profit in 2007. The numbers for 2008 are expected to decline, according to
analysts.
Meanwhile, KTF said in a statement late Tuesday that it posted sales of more than
8.3 trillion won, with a net profit of 164.6 billion won in 2008.
KT plans to submit the application for the merger with KTF to the Korea
Communications Commission, the country's telecommunications regulator, this week.

The merged entity is expected to be launched by March or April if approved by the
commission, company officials said.
The proposed merger is interpreted by experts as a way to boost competitiveness,
as there are moves by some wired and wireless carriers to bundle services to
create new profits.
In the meantime, the nation's two other mobile carriers -- SK Telecom and LG
Telecom Ltd. -- have been complaining that the merger will result in a monopoly
by KT, hampering fair competition.
"If the merger between KT and KTF is realized, a mammoth corporation will emerge,
which would engross 51.3 percent of all wired and wireless users," said SK
Telecom, the country's No. 1 mobile carrier.
Last year, SK Broadband Co., formerly Hanarotelecom Inc., was acquired by SK
Telecom, which controls more than half of South Korea's 41 million mobile phone
subscribers. SK broadband is South Korea's second-largest operator of broadband
Internet.
The LG group, one of the largest South Korean conglomerates, has both No. 3
mobile carrier LG Telecom and internet service provider LG Powercom Corp., which
controls 13.2 percent of the local internet market, under its wing.
South Korea is one of the most advanced countries in the world in terms of
high-speed Internet penetration, with 30.6 out of every 100 residents in South
Korea using broadband Internet as of 2007.
The country has a nearly saturated telecom market, with more than 45 million
mobile service users out of a population of 49 million.
"In a short period of time, the merger will act as a positive factor for the
company. However, a proper level of restructuring within the company is needed to
maximize the effect of the merger," said Lee Dong-seop, an analyst at Daeshin
Securities.
ygkim@yna.co.kr
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