South Korea - KT and KTF merger approved

KT Corp. gets final regulatory approval to absorb KTF

KT Corp., South Korea's biggest fixed-line telephone and broadband Internet operator, won final regulatory approval to merge with its mobile phone unit, KTF Co., the nation's telecom regulator said Wednesday.

The approval by the Korea Communications Commission (KCC) will make KT a telecom powerhouse in fixed-line and wireless services, enabling it to better compete with SK Telecom Co., the nation's largest mobile phone company.

"The KCC approved the merger after judging that there would be no particular problem in competition," said Shin Yong-seop, director of the telecom policy bureau.

"Consumers will also benefit from the merger because it will allow the merged company to offer better services at lower prices," Shin said.

Still, the merger is subject to the approval of shareholders of both KT and KTF on March 27. Last month, the nation's anti-trust regulator approved the merger, saying it won't undermine fair competition in the market.

A merged company will be launched on May 18, KT said earlier. Under the proposed terms of the merger, KT will offer 0.719 of its stock for each KTF share.

If approved by shareholders of both companies, the transaction will create a company with annual sales of about 19 trillion won (US$13.3 billion), a total asset value of 23.6 trillion won and some 38,000 employees, according to KT.

KT Chief Executive Officer Lee Suk-chae, a former minister in charge of telecom firms, told reporters that the merger will cut costs and enable KT to offer combined fixed and mobile services at cheaper prices.

KT, a former state-run company, controls more than 90 percent of South Korea's wired telephone market and services nearly 45 percent of broadband Internet users. KTF holds a nearly 30 percent share of the mobile phone market, compared with SK Telecom's 50 percent.

As the nation's telecom market becomes increasingly saturated, companies are trying to promote combined fixed and mobile services to cut costs and woo customers from rivals.

Last year, SK Telecom acquired the nation's No. 2 broadband operator, Hanarotelecom Inc.

South Korea is one of the world's most wired nations, with more than two-thirds of homes connected to high-speed Internet and more than nine out of 10 people owning a mobile phone.

The final regulatory approval was made after the stock market closed. Earlier in the day, shares of KT fell 0.5 percent to 38,600 won, and KTF dropped 1.8 percent to 27,400 won, underperforming the benchmark stock index's 0.5 percent gain.