KOREA: Hanaro pins hope on TV portal

Telecom looks to launch HanaTV for downloading video content to a TV monitor

Korea Times
Friday, July 7, 2006

By Kim Tae-gyu

Hanaro Telecom, Korea's second-largest fixed-line telecom carrier, looks set to restart its growth engine this month by launching TV portal services under the banner, "HanaTV."

"We will embark on HanaTV sometime in July across the country with various programs," Hanaro chief executive Park Byung-moo told The Korea Times during a recent interview.

"We are jockeying to attract 250,000 subscribers with our fancy service during this year alone… We became sure of its success through our pilot runs over the past few months," the 44-year-old said.

HanaTV enables people to download various video content like movies, music, soap operas and Karaoke to watch them on a TV monitor.

Basically, it is a video-on-demand feature based on the Internet pipeline and a set-top box, a device whereby a TV set can be linked to the Internet.

Real-time broadcasting, like terrestrial programs, will not be included in the 10,000 video line up, but users can record live broadcasts and view them later with the help of the set-top box.

Hanaro plans to charge 13,000 won per month including the set-top box price. Some premium video clips will be charged for separately.

Hanaro Telecom's 3.6 million broadband services users will be given the right to sign up for HanaTV at less than 10,000 won a month after committing to a certain subscription period.

Park said HanaTV has a shot at becoming a hit on the back of its rich content, combined with the country's good Internet infrastructure -- about four out of five homes here are hooked to broadband.

Plus, Hanaro is to further increase the commercial viability of HanaTV by adding other applications such as games to the convergence services between broadcasting and telecom.

"HanaTV subscribers can enjoy console games through joysticks connected to the set-top box with just small additional monthly fees. The feature will be added in July," Park said.

Park projected HanaTV will eventually sport such two-way applications as T-commerce, the advanced interactive channels different from today's one-way home shopping programs.

Foreign Investment Cap

Park said Hanaro stocks are overly underrated in light of the firm's respectable potential and cash flow. Hanaro stocks sell for about 5,400 won per share for its market capitalization of 1.24 trillion won, even less than its annual turnover.

"Korean investors mainly focus on whether a company nets a profit or not. Profits can be an important factor but they are not the only criteria," Park claimed.

"For telecom outfits, which have to spend heavily in networks, the big depreciation leads to losses on the balance sheet in the early days but they can be much healthier in reality and Hanaro is the case," Park said.

Hanaro, which was founded in 1997 and kick-started the bona fide broadband in 1999 for the first time in history, lost 209 billion won on 1.44 trillion won in sales last year.

"Our depreciation burden peaks this year and will plummet by up to 100 billion won every year. Then we will be able to turn to the black in the near future," Park said.

"But many local investors are turning a blind eye to such prospects unlike foreign players, who are ready to snap up our stocks. But the hitch is that there is a foreign investment ceiling," Park said.

Currently, foreigners' combined stake in Korean telecom carriers must not be higher than 49 percent, the regulations geared toward preventing foreigners from controlling crucial telecom assets.

The ceiling is especially vexing for Hanaro because its owners, a consortium co-led by American International Group and Newbridge Capital, have a 39.6-percent stake in Hanaro. That means only 10 percent of Hanaro stocks can be bought by other foreigners.

"If the investment ceiling is eased, we would get a more proper evaluation in the market. I think the government needs to do so at least for mid-tier telecom firms like us," Park said.

Date Posted: 7/7/2006