LG – Hanaro – Powercomm: 3 G

The government plans to combine LG Telecom, Hanaro Telecom and Powercomm as the third telecom group who can compete with Korea Telecom and SK Telecom.

As LG Telecom plans to announce its position on IMT-2000 Consortium, the formation of the third telecom group seems to speed up. However, not everybody is satisfied by the government’s initiation for the `combination` of the third telecom group because it goes against the market economy principle.

Information and Communication Minister Yang Seung-Taik said at the luncheon prepared by Korea Information and Communication Press Association on 17th, `The Ministry will support LG Telecom and other telecom services to be created as the third telecom group. The third telecom group should be the combination of those services who can generate synergic effect.`

Minister Yang said that if LG, Hanaro and Powercomm were to team up to form the third telecom group, it would create the safest 3 way power structure in the telecom industry.

Shin Yun-Shik, president of Hanaro, said, `Although three companies have not yet talked about a specific plan for consolidation, it will happen soon anyway.`

If consolidation is to take place, LG, with its mobile networks, Hanaro, with its local networks, and Powercomm, will together generate powerful synergic effect.

However, despite the government`s support, it seems difficult for LG to combine Hanaro Telecom and Powercomm. For instance, although LG is the largest stockholder (16.8%) of Hanaro Telecom, it seems difficult to make `bloodless entry` since shareholders` equity is dispersed into Samsung (9.01%), SK (6.12%), and Drewnet (3.41%). Powercomm also declared that it opposed to `LG-centered three way consolidation.` Hence, it looks unfavorable for LG to form the third telecom group.

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