First Data to Buy Stake In Korean Payments Company
First Data Corp. announced Thursday that it is buying an 80% stake in Korea Mobile Payment Services.
Pam Patsley, the president First Data International, said in a press release that the processing giant’s deal for Korea Mobile, a large credit card and payments processing company, “demonstrates our long-term commitment to Korea and the region.”
First Data spokeswoman Cara Taylor noted that buying Korea Mobile, which is based in Seoul, would not be the Denver company’s first payments foray into Korea; its money transfer subsidiary Western Union Financial Services Inc. already operates there.
South Korea’s card payments market is growing rapidly, with nearly 100% merchant acceptance of payment cards, First Data said. Korea Mobile, founded in 2000, has 250,000 merchant customers in South Korea, including Pizza Hut Korea, the restaurant chain TGI Fridays Inc., and Korea Railroad. Korea Mobile authorized 326 million transactions in 2004, Ms. Taylor said.
First Data is buying its stake from the three companies that founded Korea Mobile: the Korean electronic payment service provider Inicis Co., SK Corp., and SK Telecom. The remaining 20% is owned by a Korean investment fund and Korea Mobile employees. First Data hopes to buy their stakes as well.
“We are looking at a plan to allow the minority shareholders to sell their stock to First Data,” Ms. Taylor said. The price for the 80% stake was not disclosed. The deal is expected to close by yearend.
In July, First Data signed a multiyear agreement to manage credit card and merchant processing services for DBS Group Holdings of Singapore, which has a portfolio of more than 13,000 merchants and 2 million credit card accounts in the region.
First Data has also announced or completed acquisition and other deals in Europe in the past several months. Ms. Taylor said that by 2007 it wants about one-third of its revenue to come from card and merchant businesses abroad.
“A big strategy to do that would be through mergers and acquisitions,” Ms. Taylor said. (Ms. Patsley was unavailable for an interview.)
Edward Neumann, the managing director of the banking practice for CC Pace, a financial services consulting firm in Fairfax, Va., said First Data has been talking about expanding into the Asian market for at least two years. It sees Asia “as a real growth opportunity,” he said.
Payments competition there could be stiff.
“A lot of U.S. payments companies are seeing fairly low or flat growth, and they’re looking overseas for expansion, and I think this is a good example of that,” Mr. Neumann said of the Korea Mobile deal.
Bruce Cundiff, a research analyst for Javelin Strategy and Research in Pleasanton, Calif., said South Korea is one of Asia’s more advanced payments markets. “It certainly makes sense” that First Data “would make a play and they would have sort of a beachhead” in South Korea, he said.
He also said that First Data’s strategy in South Korea must “encompass the mobile aspect, because it’s so ingrained in the Korean consumer mind-set.”
First Data said in August that it had disbanded a mobile payments business, Encorus Payments Ltd., because its only customer, a consortium of European mobile phone companies called Simpay Ltd., had disbanded in June after its participants were unable to agree on what types of mobile payments Simpay would offer.
T-Mobile Ltd. wanted to embed contactless payment chips within cell phone casings, while other companies, such as Vodafone Group, wanted people to use their phones to purchase digital content such as ringtones.
