SK Telecom to acquire largest music label

SK Telecom Co. said yesterday that it is planning to acquire 60 percent of YBM Seoul Records Inc., Korea`s largest music recording company, in a 29.2 billion won ($29.2 million) deal.

The country`s biggest wireless carrier also said it is considering forming a fund with local investment companies to produce and distribute music products and seek strategic partnerships with other recording companies.

Company officials declined to comment on the size of the fund.

The move into the music recording business adds to SK Telecom`s growing portfolio in the entertainment industry as it seeks other sources of revenue that be blended with its communications network.

"For an immediate impact, the acquisition of YBM Seoul Records will give us a larger content pool to sell through our Melon digital music services," said Choi Jin of SK Telecom`s digital content development team.

"It will also give us an established distribution channel for our music services and help us expand to other markets," he said.

YBM Seoul Records is involved in producing and distributing Korean music and releasing licensed international music in the local market, holding rights to sell products from Sony Music, Jave Entertainment and Victor Entertainment.

The company is also involved in the MP3 market through its affiliate, Wizmax, a digital music content provider.

YBM Seoul Records, which had a 14.7 percent share in the local market by sales in 2003, reported 27.5 billion won in revenue on a net loss of 825 million won last year.

The music company has been struggling to adapt to the recent changes in the local music scene, where the online sector is quickly out-growing the off-line sector.

SK`s investment came just weeks after it announced plans to form a 75 billion won ($75 million) fund with local investment companies to expand its business to cover media and entertainment.

Should the plan go through, SK Telecom will control the largest investment fund in the Korean entertainment and digital content industry, according to company officials.

In February, the company spent 14 billion won to acquire 21.7 percent of IHQ Inc., an entertainment management firm.

SK Telecom had recently been attempting to increase its investment in the entertainment sector, particularly in music, movies and games.

The company is looking to develop content for its mobile data and wireless Internet services, which now account for about 40 percent of its revenue.

Earlier this month, TU Media Corp., 30 percent owned by SK Telecom, commercially launched the country`s first mobile television services, enabling customers to watch television programs on their handsets.

The company also operates a digital music service, named "Melon," which allows subscribers to download music files to their MP3 player-equipped handsets, and a video-streaming service called "June."

SK Telecom is also expecting to add more customers to its WCDMA services. The company plans to invest 600 billion won ($604 million) in its WCDMA services and network infrastructure by the end of the year when it plans to have nationwide coverage.

WCDMA, short for wideband code division multiple access, is a third-generation mobile telephony standard based on the second-generation GSM (global system for mobile communications) platform that is designed to grant customers access to a greater variety of video and data content.

With Korea`s wireless penetration reaching 75 percent, SK Telecom had been struggling to keep growth alive in a market approaching saturation. The company hopes the mobile data and digital content market will become a new revenue source.

Last month, SK Telecom announced that its first-quarter net income dropped 18.6 percent year-on-year to 368.4 billion won, the fourth consecutive quarter that the company saw profit dip. SK Telecom controls about 19 million customers, more than half of the Korean wireless market.

(thkim@heraldm.com)











By Kim Tong-hyung