Posted August. 17, 2005 06:27,
The cable network industry starting with 100,000 subscribers in 1995 is emerging as a dark horse threatening terrestrial networks and communications companies. The recent sales pitch of the cable network companies is TPS, Triple Play Service, that combines the TV, Internet, and telephony. They argue that the communications expenditure of each household could be reduced by more than 30 percent with the cable networks TPS.
The cable network service operators have agreed to establish a joint entity next month for cable telephony business. The cable telephony service starting early next year will enable 13 million cable TV subscribers to use wired lines, utilizing their cable networks. The system operators (SO) joint entity is planning to provide the service for free, an alarm bell for the previous businesses including KT and Hanaro Telecom.
The director of the Cable TV Association, Jung Ha-woong, said, The cable telephony business is a kind of free service as extra lines are used, adding, We are planning to collect monthly fees of as little as 1,000 won as a mere symbolic gesture.
High-Speed Internet Business
Cable businesses recently have started to sell package products, combining channels for cable TV costing around 10,000 won and the Internet service, centering on areas such as Bundang in Gyeonggi Province.
The number of cable Internet subscribers has exceeded one million as of the end of June from 400,000 in 2002, comprising 8.3 percent of the total share in the high-speed Internet service market.
As for Bundang, 2,500 households have newly subscribed to KTs Megapass Internet service from January to May, while the Cable Areum Network has seen an increase of 2,500 per month, 30 percent greater compared to the previous year.
One cable network official said, What attracts the users is the price competitiveness, which enables them to access the high-speed Internet service and networks at around 13,000 to 17,000 won.
The cable businesses are outrunning the terrestrial networks to a critical extent. At the end of June, the Korean Broadcasting Commission released publications of the financial status of the broadcasting businesses, and it said that net profits of cable TV reaching 118.5 billion won, for the first time, surpasses those of the terrestrial networks (113.6 billion won).
As for the System Operators (SO), net profits increased 173 percent from 25.3 billion won in 2003 to 69.1 billion won last year, and program providers increased 113 percent from 23.1 billion won to 49.4 billion won.
As for the viewers rating revealing how many TV viewers watch a given channel, terrestrial networks had a decrease from more than 80 percent in 2000 to around 61 percent this year, while cable networks enjoy around 38 to 39 percent.
Getting Bigger Thanks to M&A
Growth in businesses leads to skyrocketing prices for the cable businesses along with the waves of M&A. There are rumors going on that in April, Hyundai Department Store acquired Seoul Gwanak Districts SO of 100,000 subscribers, profiting cable networks with 700,000 won for each subscriber, a total of 70 billion won. In June, C&M Communications, which owns 14 SOs in Seoul, acquired the Ilsan Districts SO in Gyeonggi Province. As for Seoul Gangnam Cable with 165,000 subscribers, it is on the top of the list for M&As, but it would not be easily sold off even with hundreds of billions of won.
Such M&As aim at overcoming the weaknesses of dispersion in small groups, contrasting with companies such as KT, besides aiming at dominating the industry.