"Who Will Own Hyundai HCN?" Paid Broadcasting Market Shakes Again... Telecom 3 Giants' Strategic Battle

[Asia Economy Reporter Seulgina Jo] Amid the reshuffling of the paid broadcasting market, the market rankings are expected to fluctuate again depending on which of the three major telecom companies acquires Hyundai HCN, the 5th largest cable TV operator that has appeared as a publicly listed asset.

As KT, the number one paid broadcasting company, enters a new leadership system and the three telecom giants prepare their management fronts, the 'M&A Season 2' has officially begun. Following the completed M&As of LG HelloVision (formerly CJ Hello) and T-Broad, the cable TV industry's exit strategy is also accelerating.

According to the Ministry of Science and ICT on the 31st, Hyundai HCN, which is up for sale, had 1,345,365 subscribers as of the first half of 2019, recording a 4.07% market share in the paid broadcasting market. It ranks 5th in the industry after LG HelloVision, T-Broad, D'Live, and CMB. In particular, Hyundai HCN is considered a 'prime asset' with a high average revenue per user (ARPU) because it secures subscribers in the Gangnam area of Seoul. This is why it has been the top candidate for the next asset sale whenever cable TV M&As centered on the three telecom companies have continued last year.

Currently, the domestic paid broadcasting market has been reorganized into a three-strong telecom structure led by IPTV. While KT, which has dominated the paid broadcasting market, has been hampered by the National Assembly, LG Uplus and SK Broadband each expanded their scale last year by acquiring CJ Hello and T-Broad, respectively. The merged corporation between SK Broadband, a subsidiary of SK Telecom, and T-Broad is scheduled to launch next month.

The market share leader is KT and KT Skylife with 31.31%. Following are ▲LG Uplus and LG HelloVision with 24.72% ▲SK Broadband and T-Broad with 24.03%. With Hyundai HCN holding a 4.07% market share, the rankings can change anytime depending on which company acquires it.

Among the three companies, SK Telecom, which is evaluated to have the greatest cash mobilization capability, could reclaim second place by pursuing additional M&A to expand synergy with SK Broadband, pushing LG Uplus down. The market share would expand to 28.1%, narrowing the gap with first-place KT to around 3 percentage points. Park Jung-ho, CEO of SK Telecom, who was reappointed as an inside director at this month's shareholders' meeting and has entered his second management term, has expressed his intention for M&A, making SK Telecom a strong candidate for acquisition.LG Uplus is also likely to defend its second place in paid broadcasting through a second M&A following LG HelloVision.

KT is also eager for M&A as it can expand economies of scale and distance itself from competitors. However, the problem lies in the sluggish discussions in the National Assembly regarding post-regulation measures following the sunset of the paid broadcasting combined regulation. Previously, KT completed due diligence to acquire the third-largest operator D'Live but was unable to enter the bidding due to the combined regulation. This issue is also considered a challenge for Koo Hyun-mo, who was appointed CEO of KT yesterday.

As IPTV led by mobile carriers expands, cable TV subscribers are steadily decreasing. Besides LG HelloVision and T-Broad, which have already undergone M&A, Hyundai HCN, D'Live, and CMB are also consistently mentioned as potential assets for sale. With Hyundai HCN also coming onto the market as a public asset, the pace of restructuring in the paid broadcasting industry is expected to accelerate further.

Yesterday, Hyundai Department Store Group announced that it will split Hyundai HCN's broadcasting and telecommunications business into 'Hyundai Futurenet (the surviving company)' and 'Hyundai HCN (the newly established company).' Along with the physical split, the sale of Hyundai HCN's shares is being considered. The new owner is expected to be decided through a competitive bidding process as early as April.