01-08-99 LG expected to shift focus to telecom business
Now that the LG Group has decided to hand over its semiconductor unit to rival Hyundai Group, it will shift its business focus to the telecommunications sector, industry sources said yesterday. Concluding the chip merger, LG denied the possibility of any "compensation" from Hyundai or the government in return for its abandonment of the chip-making business. But industry sources say that in follow-up talks to the chip deal, LG will seek to acquire the telecommunications stakes currently held by Hyundai in Dacom, Hanaro Telecom and other communication service providers.
LG Group, which has LG Telecom, a mobile service unit and LG Information and Communications, a telecom equipment maker, has often expressed a desire to expand its business around the telecom sector. LG will likely ask the government to remove its stockholding limit in Dacom, an intercity and international call carrier, according to sources. While entering the personal communications service (PCS) business in March 1996, LG pledged to limit its stake in Dacom to five percent, under pressure from rival Samsung and Hyundai groups.
But LG has since demanded the limit be removed, citing that a freer competition environment is essential to improving the quality of telecom services. Officially, LG Group has 4.9 percent of Dacom. Industry officials, however, believe that its stake will rise to almost 30 percent, if the stakes held by LG's friendly shareholders are taken into account. In case LG takes over the 6.2 percent of Dacom shares held by Hyundai, it will emerge as the long-distance call carrier's largest shareholder, sources said.
Dacom, meanwhile, is a major shareholder of Hanaro Telecom, which is set to start a local call service in April. If LG takes over Hyundai's 4.44 percent stake in Hanaro Telecom, it will also have the greatest share in the local call carrier. Under growing financial burdens caused by its aggressive expansion, Hyundai Group may also give up its interest in Onse Telecom to LG, sources said. They said Hyundai, which is said to have almost 30 percent of Onse Telecom, an international call service provider, cannot afford to spend more money in the carrier, which usually requires continuous investment. If LG takes over the telecom stakes from Hyundai, it will become one of the three major players in the industry, together with Korea Telecom and SK Telecom, sources said.
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