South Korean companies that provide cellular and Internet services may merge as more people use their mobile-phones to access the Internet at high speed, KT Corp CEO Lee Yong Kyung said.
"By actually merging the companies, they can have bigger synergy," said Lee, head of Korea's largest Internet access provider, in an interview in Busan, Korea. "I think it can be very possible that we will see cross-industry mergers also."
Mobile service providers such as KT and SK Telecom Co. are bundling Internet and phone services into a single package to boost revenue in a market that's close to saturation for new users. Seven out of 10 Koreans own a mobile phone and three in four Korean homes have high-speed Internet access, the world's highest penetration rate.
"Mergers seem to be the final destination that telecom companies should go to reduce unnecessary costs" by overlapping businesses, said Kim Jun Ki, who manages the equivalent of $347 million at Hanwha Investment Trust Management Co in Seoul. Telecoms can "generate synergy through combining fixed-line and wireless phone businesses."
On the list of possible mergers are SK Telecom with Hanaro Telecom Inc, Korea's second-largest high-speed Internet access provider, and Seongnam-based KT with affiliate KT Freetel Co, Korea's second-largest mobile phone operator, according to analyst Stan Jung at LG Investment & Securities Co.
"Asian telecom companies ultimately want to be able to provide ubiquitous services, regardless of fixed-line or wireless," said Cho Jeom Hoh, an analyst at Woori Securities Co in Seoul. "In this respect, SK Telecom and Hanaro Telecom will need each other to provide the services they don't have."
KT Freetel would welcome a merger with KT should the government allow it, said Han Hoon, chief strategy officer at Seoul-based KT Freetel. Still, the government "worries a merger between the two companies will affect the competitiveness in the mobile service area, so that's the hurdle of the regulation side."
Korea Thrunet Co, the nation's third-largest provider of high-speed Internet access, is up for sale. Seoul-based Hanaro, which was taken over last year by American International Group Inc and Newbridge Capital Ltd of the US, and LG Group unit Dacom Corp have said they're interested in buying Thrunet.
KT's Lee, who didn't name which companies or when he expects industry acquisitions to occur, reiterated that he is not considering a merger with KT Freetel.
"For KT and KTF, in this competitive environment, I think we are still better off by staying separate," said Lee, who spoke during International Telecommunication Union meetings in Busan.
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