The LG U+ merger with CJ Hello is approved

The LG U+ merger with CJ Hello received final approval Sunday, a deal that will transform the competitive landscape in the telecom and broadcasting businesses now near completion.

Once the transaction is finalized, KT’s clear dominance of the paid TV market will be brought to an end, while LG U+ will become the undisputed leader in the local budget-phone market.

The Ministry of Science and ICT said Sunday it has conditionally approved the purchase of 50 percent plus one share of CJ Hello, the largest cable TV and budget phone operator in the country, by Korea’s third-largest mobile carrier.

The Fair Trade Commission (FTC) signed off on the merger last month.

Sunday’s approval signals a clear shift in the government’s position as local players face intense competition from foreign companies like Netflix.

In 2016, the government denied SK Telecom’s request to merge with CJ Hello, citing concerns about the limiting of competition.

“This merger will help LG Group make its second leap in its telecom business,” said LG U+ CEO Ha Hyun-hwoi. “We will restructure the competition of the markets and create various augmented and comprehensive services beyond customer expectations with our now-doubled 8.25 million cable TV subscribers.”

With the merger, LG U+ is looking to position itself as a comprehensive media platform business with over-the-top (OTT) media service capabilities. It announced last month that it will commit 2.6 trillion won ($2.2 billion) over the next five years to up the competitiveness of the cable TV platform after the acquisition, such as by enhancing the picture quality of TV channels and jointly developing new programs.

After the transaction, LG U+ will become the second largest paid broadcasting service provider, with a market share of 25 percent, just behind its rival KT, which holds around 31 percent.

LG U+ is preparing augmented reality and virtual reality content for the combined service and is also developing some kid-friendly programing. CJ Hello customers will also be able to receive discounts on mobile phone services from LG U+.

LG U+ said it will invest 620 billion won over the next five years to develop network infrastructure with CJ Hello.

It also plans to pour in an additional 190 billion won over the next five years into CJ Hello-owned regional news and lifestyle channels.

Under the terms of the conditional approval, the ministry is requiring LG U+ to offer 5G network services at two-thirds the current rate, taking a 5G subscription down to 36,600 won a month from 55,000 won. LG U+ will also have to offer certain discounts on network products.

The FTC’s approval also came with conditions. LG U+ will have to keep price increases on cable services to the inflation rate and will not be able to arbitrarily reduce the number of channels available. The FTC is also prohibiting LG U+ from coercing customers to change to more expensive subscription plans.

BY KIM KYUNG-JIN, KO JUN-TAE [ko.juntae@joongang.co.kr]