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KT-KTF merger will mark shift to packaged services

New entity will invest $12 billion in network over 5 years

Mar 21,2009

Triumphant in the wake of government approval of a merger with its mobile unit KTF, KT yesterday unveiled an ambitious plan to build a 16.6 trillion won ($12 billion) next-generation network in the five years following the consolidation.

The nation’s largest landline operator said it would also spend 2.4 trillion won over the same period to converge wireless and fixed-line services.

Earlier this week the Korea Communications Commission approved KT’s merger with Korea’s No. 2 mobile service provider.

The merger is considered Korea’s largest ever outside the financial industry.

It was a bid for survival by KT, which has been losing landline customers for years to mobile and now Internet phone services.

KT’s once-thriving high-speed Internet business has also seen growth grind to a near-halt due to market saturation. KTF also needed to step up its game against dominant mobile firm SK Telecom, who with other KTF rivals called the reunion of the two companies a serious threat to competition.

The combined revenue of the two companies last year exceeded 19 trillion won, more than all of its independent competitors including SK.

Once the two companies integrate completely they will manage customers and clients in four groups: individuals, home customers, corporations and service design clients.

The reintegration of the two firms, which split in 1996, is expected to bring a new era of convergence to telecommunications, leading to sales of landlines, mobile service, high-speed Internet and Internet television as packages.

“KT will provide cheap and diversified products that combine fixed lines with wireless broadcasting and telecommunications service,” said Lee Gil-ju, head of public relations at KT.

“Wibro, the next generation of wireless Internet, will be connected with Internet television and third-generation mobile communications.”

Even the government has high hopes for the merger. Shin Yong-sub, director of the KCC policy bureau, said “A merger of landline and mobile services will stimulate service packages and diversified, integrated products that will make telecommunications more convenient for the public.”

The new KT is expected to intensify competition and encourage other mergers. According to rumors SK Telecom is currently reviewing a merger with its Internet affiliate SK Broadband.

Combining Internet phone and mobile services may reduce KT’s revenues. But at the same time it could attract more mobile subscribers, which would increase its market share.

Currently SK Telecom enjoys a distinct advantage, with 23 million mobile subscribers to KTF’s 14.4 million.

However, KT enjoys decisive dominance in the fixed line market and hopes to convert many of those customers into more lucrative mobile subscribers at KTF. Shareholders at KT and KTF will decide on final approval of the merger on March 27 at a joint shareholders meeting, while the newly merged entity is scheduled to officially launch in June.



By Lee Ho-jeong Staff Reporter [ojlee82@joongang.co.kr]



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