SK Telecom to pull out of SDMB services; 500 billion won may go up in smoke

SK Telecom has effectively decided to end satellite digital multimedia broadcasting (SDMB) services offered by its subsidiary, TU Media. The mobile telecom giant judges that even an additional investment in TU Media won't help the latter gain viability, considering its presently weak competitiveness. Some 1.28 million people currently subscribe to SDMB services. The services require at least 2 million subscribers to become economically viable, but the number of subscribers has been declining, rather than increasing. The SDMB services have lost ground because rival terrestrial DMB services are offered free of charge. Though SDMB offers superior contents, users are shunning the services, which fail to offer reruns of network TV programs, and which require service fees. If SK Telecom ends the SDMB services, some 500 billion won it invested in satellite, stake, facilities and contents development will go up in smoke.

More than 1 million subscribers who bought expensive handsets to enjoy SDMB services will inevitably suffer damage. SDMB's most critical shortfall is that it fails to deliver real-time reruns of network TV programs, which constitute the most popular contents among DMB service users. Also, it is all too apparent that users will prefer TDMB, which offers all different network TV programs free of charge, to SDMB. The government originally prompted a two-way competition between fee-based and free DMB services. It granted a permit for TDMB services right after the launch of SDMB services in May 2005. This has posed a key stumbling block to both media services, which had been striving to take off as viable business models. TU Media has failed to increase its subscriber base, though it has increased the number of new subscribers. The number of new subscribers amounted to 50,000 on average per month last year, but declined to 20,000 this year. Another reason for SDMB's failure is that SK's rival telecom carriers KTF and LG Telecom declined to offer SDMB. TU Media has incurred 40 billion won in losses in the first half alone, with its cumulative deficit rising to 235.5 billion won. Its deficit is projected to hit 270 billion won by year's end, which would be more than its paid-in-capital of 268.2 billion won. Some are raising the possibility for a capital increase for TU Media. But SK Telecom, the majority stake holder, thinks such a move would have little impact, if any. In the final analysis, SK Telecom apparently has decided to give up TU Media, since neither TU's capital increase nor sell-off looks plausible. However, the backlash resulting from such a liquidation would not be insignificant.