SK Broadband recently recorded losses in the cable TV (comprehensive cable broadcasting - SO) institutional sector for two consecutive years. Among the five multiple system operators (MSOs), SK Broadband is the only one to have recorded losses in its broadcasting business during this period. Although it promised 'synergy creation' following the merger with T-broad five years ago, the cable TV business has actually collapsed.
According to the pay-TV industry on the 2nd, SK Broadband, an internet service provider (ISP) and internet (IP) TV operator, merged with T-broad, an MSO, in April 2020. It drew attention as the first merger case between an IPTV operator and an MSO.
According to the '2024 fiscal year broadcasting operator asset situation' announced by the Korea Communications Commission on the 30th of last month, SK Broadband's cable TV business recorded an operating loss of 25.8 billion won last year. Although the loss amount decreased from 28.2 billion won in 2023, it has fallen into consecutive losses for two years. During this period, revenue also decreased by 2.7% from 382.8 billion won to 372.9 billion won.
In contrast, other MSOs such as LG HelloVision (12.7 billion won), D Live (100 million won), KT HCN (10 billion won), and CMB (6.5 billion won) all recorded profits in their broadcasting business last year.
The losses recorded by SK Broadband's cable TV business are due to the mass migration of existing subscribers to IPTV. The industry criticizes that this is a result of focusing only on the profitable IPTV business and neglecting the competition expansion of the cable TV's original business. There are suggestions that the 'subscriber transfer' concern raised at the time of merger has become reality.
As of last year, SK Broadband's cable TV business sector transitioned to losses for the first time in 17 years, since the Korea Communications Commission began publishing the asset situations of broadcasting operators in its current form. This means that there were no operating losses in the broadcasting business sector during the T-broad era. The industry assesses that the company has actually lost the competitiveness of its cable TV business compared to before the merger, as it has not achieved business improvements this year.
◇ 'Cable TV→IPTV' subscriber transfer has also increased content usage fees… Double whammy leading to worsened profitability
With the acquisition of T-broad, SK Broadband became the only company in Korea that operates both IPTV and cable TV businesses simultaneously. SK Broadband, which was proactive in the merger, outlined a blueprint to enhance competitiveness in both IPTV and cable TV services through ▲ media platform enhancement ▲ accelerated subscriber base expansion ▲ and business model expansion.
Five years after the merger, the 'synergy creation' that SK Broadband spoke of is confined solely to IPTV. The effect of transferring cable TV subscribers to IPTV is particularly pronounced. Just before the merger in 2019, T-broad's broadcasting business revenue was 497.1 billion won. This means that over 100 billion won has been lost within five years since the merger. Considering that operating profit was 96.8 billion won in 2019, it has decreased by 122.6 billion won over the five years since the merger.
In contrast, SK Broadband's IPTV business revenue increased from 1.252 trillion won in 2019 to 1.634 trillion won last year. This is an increase of 30.5% since the merger with T-broad. The operating profit also tripled during this period, growing from 129.1 billion won to 388.6 billion won. An official from the pay-TV industry pointed out, 'By acquiring T-broad, existing subscribers have been turned into higher-profit IPTV, emphasizing that the focus was on profitability rather than strengthening cable TV's original competitiveness, which has a public interest by operating regional channels.'
The transfer of cable TV subscribers to IPTV was a concern at the time of the merger between SK Broadband and T-broad. At that time, the Ministry of Science and ICT, which reviewed the merger, noted that 'there is a risk that the merged entity will unjustifiably convert cable TV subscribers to IPTV,' and included 'prohibition of forced transfers' as a merger condition. In response, SK Broadband stated, 'Customers chose the products considering things like bundled discounts themselves.'
SK Broadband also explained that the worsening profitability in the cable TV business sector is due to both the 'subscriber transfer to IPTV' and expanded content investments. Won Jong-rok, Deputy Minister of SK Broadband, said, 'The expenditure on content usage fees, which we are incurring to strengthen the cable TV business, is exceeding the related revenue (basic channel reception fees), leading to worsened performance.' He added that 'increased equipment investment costs for enhancing set-top boxes' is also a contributing factor.
Last year, the ratio of basic channel program usage fees in the SK Broadband cable TV business sector was recorded at 102%. This indicates that more is being spent as 'basic channel program usage fees' than the basic channel reception fees. During this period, other MSOs' usage fee ratios for basic channel programs, such as LG HelloVision (68%), D Live (80%), KT HCN (62%), and CMB (58%), did not exceed 80%.
Meanwhile, SK Broadband, a subsidiary of SK Telecom and an unlisted company, is in a state designated as a cross-shareholding limited group, thus disclosing quarterly results. However, it does not specifically reveal revenue and operating profit by business sector. Businesses such as internet, fixed-line telephones, and dedicated lines are categorized under the 'wired communication' sector, while IPTV and cable TV businesses are combined under the 'media' sector for revenue announcements. Results by business sector can only be confirmed through the Korea Communications Commission's asset situation aggregations.