HelloVision deal faces legal dispute

SK Telecom’s proposed acquisition of CJ HelloVision, the country’s top cable TV network, has come under regulatory scrutiny as the cable operator’s plan to seek shareholders’ approval may be illegal.

CJ HelloVision said on Friday that it will hold a shareholders meeting on Feb. 26 to ask investors to approve the proposal, but critics say that the move may violate broadcasting law.

Under the law, a unit that effectively controls a broadcasting company is banned from executing any right over the company’s shares before authorities grant formal approval for any merger and acquisition.

While CJ O Shopping is the largest shareholder, with a 53.9 percent stake, many believe the affiliate of CJ Group will favor SK Telecom’s position to pass the deal.

The Ministry of Science, ICT and Future Planning, the Korea Communications Commission and the Fair Trade Commission are reviewing the proposal, and a decision on the legality may come in the first half of this year.

CJ HelloVision maintains the process does not breach any legal controls. “The shareholders meeting is a separate event from the government approval,” said a source at CJ HelloVision. “The shareholders meeting can be held based on the rights entrusted in the top shareholder.”

However, CJ HelloVision later released a revised notice about the meeting, saying that “the merger could fall through if [CJ HelloVision and SK Telecom] fail to receive approval” from the three regulators.

The backlash is the latest in a string of hurdles facing the deal after SK Telecom decided to acquire a controlling 53.9 percent stake in CJ HelloVision for 1 trillion won ($850 million) last year.

At the time, SK Telecom said it plans to merge CJ HelloVision with its wholly-owned broadband Internet subsidiary, SK Broadband, which operates IPTV services along with its landline business.

Major telecommunications rivals KT and LG U+ and some analysts opposed the plan, since SK Telecom’s management of the TV service provider could compromise public trust in the media business.

CJ HelloVision distributes ready-made TV content and makes programs outside of Seoul.

The two telecom firms are working together to derail SK’s proposal, saying the combination of the largest cable TV service provider and the top telecommunications operator with a broadband subsidiary under its belt could violate fair business practices.

SK Telecom plans to invest 5 trillion won over the next five years in media-related businesses should the company’s proposal be approved.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]