WiBro boost through KT/KTF merger? update from January 2009

After months of speculation, KT (Korea Telecom) has finally said it will merge with its mobile operator subsidiary, KTF (Korea Telecom FreeTel). By bringing the two companies together (KT already owns 54.3 percent of KTF), it opens the door for more fixed and mobile bundled packages, which many analysts see as essential for KT (the dominant fixed broadband player in South Korea) to compete more effectively in the country’s mature broadband marketplace.

SKT, South Korea’s number one mobile operator in terms of subscribers, has already acquired fixed broadband player Hanaro and so can provide quadruple-play services of its own. So too can the LG Group, the country’s third biggest telecom player, which also has both fixed and mobile networks at its disposal.

The KT/KTF merger may also give a boost to KT’s WiBro service, the mobile WiMAX brand in South Korea. “A KT/KTF merger would help to offer a tightly-coupled pricing plan of WiBro and HSDPA data services together,” said Dr. Hyun-Pyo Kim, director of the WiBro Business Unit at KT, in an e-mail exchange with WiMAX Vision last year. “In addition, limited coverage of WiBro-especially in small cities or rural areas-would be supplemented by KTF’s HSDPA network.”

NTT DoCoMo, Japan’s leading mobile operator by subscribers, owns 10.7 percent of KTF. KT says it will sell $253m bonds to NTT DoCoMo, exchangeable into stocks, as part of the merger plan. NTT DoCoMo is planning to transfer 60 percent of its holding in KTF to KT.