Korea Thrunet Makes First Infrastructure Buys

Korea Thrunet Co. Ltd., a provider of broadband Internet access systems in South Korea, says it has acquired stakes in eight regional cable television system operators in the country.

The 58.3 billion won (US$51.4 million) investment marks the company's first acquisition of infrastructure and comes less than two months after the government relaxed rules that previously barred Thrunet from acquiring cable system operators. Of the eight stakes it acquired, six were majority stakes.

The acquisitions do not mean a change in focus for Thrunet or a move into the cable TV business, spokesman Thomas Sung said today.

"The companies will be operating as separate entities and will continue to focus on cable television," Sung said. "Working with us, they will provide Internet services."

The eight operators involved in the deal together have 1.6 million homes, of which 0.6 million are currently passed by the cable network lines. "The cable industry is in its beginning stage right now and they are still building the network," Sung explained. "Homes passed penetration is at 40 percent, but we will increase this to 80 percent within this year."

Sung said Korea Thrunet also sees a change in the type of subscriber.

"Our current customer base consists of 70 percent non-cable TV subscribers and 30 percent cable TV subscribers. We believe that we can increase our broadband subscriber base rapidly," Sung said.

The deal makes Korea Thrunet the third-largest player in the local cable system operator business after Korea Electric Power Co. Ltd. (KEPCO) and Korea Telecom, with control of six of the 77 regions nationwide in which the government has licensed a single operator. At present, KEPCO-affiliated companies represent around 70 percent of system operators, with Korea Telecom operators making up the remaining share with the exception of two independent operators.

The Thrunet deal saw it take control of two Korea Telecom cable networks, three KEPCO networks and one independent operator. In addition, it acquired a minority stake in two additional KEPCO networks.

KEPCO held a 7.26 percent stake in Thrunet but sold it to Sejong Securities in late 1999 as part of a government-sponsored restructuring plan. Other major shareholders in Thrunet include Trigem Inc. and Microsoft Corp.

Korea Thrunet, in Seoul, can be found online at http://www.thrunet.com.

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