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Newsletter | December 2013
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BROADCASTING & TELECOMMUNICATION |
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Restrictions on Foreign Investments in Facilities-Based Telecommunications Service Providers Relaxed |
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The amendment to the Telecommunications Business Act (the “Act”) became effective on August 13, 2013. The amendment to the Act relaxed the restrictions on indirect foreign investments in facilities-based telecommunications service providers (“FSPs”).
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Previously, the Act restricted direct foreign investments by limiting a foreign government or foreign investor’s shareholding in Korean FSPs to 49%, as well as indirect investments by treating the shareholding of a domestic entity as “foreign” shareholding if the largest shareholder is a foreign government or a foreign individual and holds more than 15% of the total outstanding shares.
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The amendment to the Act allows a domestic entity in which a US or EU government or citizen is the largest shareholder and holds more than 15% of the total outstanding shares to acquire shares of a domestic FSP without limitation.
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However, for certain FSPs that meet certain conditions, the Act now requires investors or concerned FSPs to go through a public interest review by the Ministry of Science, ICT and Future Planning if it acquires more than 15% of the total issued shares of the applicable FSPs, or if there are certain changes such as a change in the largest shareholder or in the shareholder that has actual management control. This review requirement also applies to domestic entities acquiring shares of FSPs in an indirect manner through the aforementioned exception.
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Despite the public interest regulatory review requirement, the amendment is significant because it broadens the opportunities for US and EU individuals or legal entities to invest in domestic facilities-based telecommunications service businesses. |
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