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Softbank Acquires Korea's Nowcom

Japan's Softbank, which is owned by Korean-Japanese businessman Masayoshi Son, has acquired Nowcom, one of Korea's top four leading online service providers.

An executive of Nowcom said that Asia Online, Softbank's subsidiary in Hong Kong, has reached an agreement with Han Chang Group to undertake its controlling ownership in Nowcom.

Han Chang, the cordless phone manufacturer, is to sell at least 51 percent of its ownership in Nowcom at 40,000 won (about US$33.5) per share, four times the par value of 10,000 won (US$8.50), according to industry sources.

At present, Han Chang owns a 62.5 percent stake in Nowcom, the online service company with the capital of 10 billion won.

With the projected acquisition by Softbank, Han Chang's ownership in Nowcom will drop to 11.5 percent.

"Softbank's acquisition of Nowcom would mean a massive capital injection in domestic IT industry by a foreign investor," said an observer. "This is second major foreign investment in the industry after PSINet's takeover of Inet, one of the leading ISPs in Korea, for US$32 million last year."

"With the acquisition of Nowcom, advanced contents and IT technologies of Softbank are expected to be introduced to the Korean online information service market, posing a threat to market leaders such as Dacom and Korea PC Telecom at the same time."

He also said that the takeover would shake the domestic online service market, which is dominated by such providers as Chollian, Hitel and Unitel because Softbank has a global network of Internet services and is backed by huge capital.

Nowcom, a relatively newcomer in the market with nearly 980,000 subscribers and 160 employees, has hardly competed with local rivals armed with large capital and organized marketing know-how such as Chollian and Unitel in the midst of toughening local market environment.

However, the market situation may change with the Japanese giant's entry into the market through acquisition of Nowcom.

Industry analysts said that M&As and strategic alliances between foreign companies and Korean firms are expected to be continued in the industry.

Recently, Samsung Corp. joined forces with America Online, and Mirae Corp. formed a tie-up with U.S.-based Lycos, so the Korean market for Internet-based online service will further toughen with Softbank's expansion in Korea.