SK Telecom, Korea's biggest cellco, and messaging and content provider Kakao have ended a sometimes bitter rivalry by agreeing a 300 billion won ($256 million) stock swap.
Under the deal, announced Monday, SK Telecom will sell 1.6% of its own shares to Kakao, and in turn will acquire 2.5% of its partner's stock.
The companies plan to work together on un-named 5G services and aim to "maximize customer experience and benefits" by combining Kakao's messenger platform with the SK Telecom network.
They will also collaborate closely in e-commerce, digital content and future ICT development.
The agreement draws a line under the intense competition between two of the heavyweights of the Korean digital economy.
They have butted heads over international voice calls, navigation and in-car entertainment.
The biggest prize, and most likely the driver behind the deal, is AI.
When taxi drivers went on nationwide strike to protest Kakao's new carpooling app last December, SKT stepped up marketing of its taxi app in support. At around the same time, SKT tore up its partnership with Kakao's popular music streaming service, Melon, to offer its own.
Both moves were driven by a desire to gain the upper hand in the emerging Korean AI business -- taxis because of their ability to gather huge amounts of useful data, and streaming because it increasingly relies on AI to create the user experience.
Both SKT and Kakao have developed AI voice platforms that work with smart speakers and vehicle entertainment systems. The Kakao home speaker reads messages, makes calls and controls home IoT devices.
For SK Telecom, which has around 2 million 5G customers, this is the latest in a series of 5G and content deals it has struck this year, including with Comcast for esports, Microsoft for gaming, Samsung for 8K TV and LG for cloud robots.
Its revenue from non-telecom sources, such as IPTV and ecommerce, now account for nearly a fifth of its total business.
Kakao is best-known for its messaging app, with 44.4 million active users worldwide.
But it also runs media, navigation, payments, games and Internet services, with content accounting for 55% of total income and platform services 45%.
In its second-quarter filing, it reported a net profit of KRW31 billion ($26 million) on KRW773 billion ($624 million) in revenue.
SKT said the two firms would form a "synergy committee," jointly led by SKT vice president Ryu Young-sang and Kakao co-CEO Yeo Min-soo, to develop "concrete business models."
In future, the partners would "combine SKT's subscriber base and AI technology know-how with Kakao's portal, contents, and service power," SKT said.
— Robert Clark, contributing editor, special to Light Reading