SEOUL: The LG Group, South Korea's second-largest conglomerate, said it planned a strategic tie-up of three of its telecoms affiliates to help compete with bigger rival KT Corp.

LG, which runs Dacom Corp, the country's second-biggest fixed-line carrier, and is the biggest shareholder in Hanaro Telecom and Powercomm Co, a cable network operator, wants to build a strategic business in the telecoms sector.

"A merger of Hanaro, Dacom and Powercomm would save costs by 300 billion won over the next three years," Jung Hong-shik, president of LG's telecoms business operation, told reporters.

Jung said the group would ask Hanaro Telecom to issue rights worth 500 billion won.

He also said LG might attempt to acquire Thrunet Co, a troubled Internet service provider, if the price was "appropriate."

LG Group also has an interest in the mobile sector with LG Telecom.

Hanaro had to delay a decision on a $1.05 billion investment from a group led by American International Group Inc in late June as some board members said the deal undervalued the firm.

Hanaro had planned to sell $450 million of new shares to the foreign investors and borrow $600 million in syndicated loans from the group, giving the AIG-led group a stake of about 40 percent.

Shares of Hanaro, listed on the over-the-counter Kosdaq market, were up 4.3 percent at 3,180 won at 0220 GMT, outperforming the Kosdaq index, which was up 0.1 percent.

Dacom was up 2.8 percent at 12,850 won.

© Reuters