SK Telecom’s (SKT) acquisition of SK Broadband (SKB) will be important in enabling the country’s largest mobile player to better compete with its integrated rivals KT and LG Uplus.

SKB’s fixed-line network has become increasingly vital to SKT’s wireless operation in helping it keep up with rising data traffic, Fitch Ratings said. The acquisition also will strengthen the operational links between the two firms and give SKT more flexibility in increasing investments in SKB’s fixed-line network.

Moody’s agrees that SKT’s full ownership of SKB — South Korea’s second-largest fixed-line operator — will enhance its ability to compete efficiently with the country’s fully integrated operators.

SKT announced last Friday it will acquire the 49.44 per cent of SKB it does not already own via a share swap, which is scheduled to be finalised on 9 June. SKB will be delisted on 30 June, pending shareholders’ approval.

The proposed acquisition will not affect SKT’s rating, and Fitch sees no immediate rating impact on SKB. It believes SKT’s credit profile will remain in line with its current rating level (A-/Stable) as the company will exchange its treasury shares for SKB shares in a transaction worth about KRW706 billion ($625 million).

Moody’s forecasts that SKT’s revenue this year will continue to grow by low-single digit percentages, supported by the solid growth from its IPTV and corporate businesses. ARPU should also continue to expand, driven by the growth in 4G services. Its margins, however, will remain under pressure due to intense competition.