LG Telecom, LG Dacom shares up on merger talk

SEOUL (Reuters) - Shares in LG Telecom (032640.KS) and LG Dacom Corp (015940.KS) were lifted early Monday by expectations of a looming merger between LG Group's telecom units that analysts said could help marketing and cut costs.

South Korea's saturated telecom market has seen a fresh round of competition over packaged products combining fixed-line, mobile, broadband and Internet TV services, a trend that facilitates the grouping of operators struggling with costly marketing wars.

Korea Economic Daily reported on Monday that LG Group was planning to merge mobile operator LG Telecom with fixed-line firm LG Dacom and broadband provider LG Powercomm in the next two years, citing an unnamed group source.

While a merger between LG Dacom and LG Powercomm has been widely expected, the two companies have yet to decide on any details. LG Powercomm is set to raise up to 134 billion won ($96 million) in an initial public offering later this month.

"A merger between Dacom and Powercomm would be the right way to go, but no decision has been made on timing or other details," said a spokesman at LG Dacom.

LG Telecom denied it was considering combining with the two other units.

At 0114 GMT (8:14 p.m. EST), LG Telecom shares were up 2.47 percent at 9,940 won and LG Dacom rose 0.72 percent to 20,950 won, bucking a 2.01 percent drop in the telecom service index .KS40 and the broader market's 2.13 percent loss.

"I think merging all three would be the right strategy in the long run," said Yi Dong-sub, an analyst at Daishin Securities.

"There will be significant benefits from sharing customer information and marketing channels and in cutting costs as well."

LG Group's telecom units compete with SK Telecom (017670.KS), South Korea's top mobile carrier, which this year acquired control of the No. 2 domestic broadband firm, now renamed SK Broadband (033630.KQ).

Second-largest mobile firm KTF Co Ltd 032390.KS is a unit of the country's top fixed-line and broadband provider KT Corp (030200.KS). KT and KTF have also widely been expected to merge.

($1=1399.3 Won)

(Reporting by Rhee So-eui; Editing by Jonathan Hopfner)