The Legislative Yuan's technology committee yesterday decided that there should be three global coordinators to underwrite the overseas portion of Chunghwa Telecom's (
The decision was made despite fierce opposition from Chunghwa Telecom, which prefers only one global coordinator.
It also came on the heels of legislators' allegations that Chunghwa Telecom has singled-out Morgan Stanley Dean Witter & Co as a global coordinator because Vice President Lien Chan's son now works at the company's Hong Kong headquarters.
According to Chunghwa Telecom's plans, the privatization will be carried out in two phases.
In the first stage, 33 percent of the company will be sold next October -- 19 percent will be sold to foreign investors, 3 percent to domestic institutional investors, 6 percent to domestic investors, and the remaining 5 percent reserved for employees.
In the second phase, slated to take place in January 2001, Chunghwa Telecom will release another 33 percent stake, with the aim of completing its privatization by 2001. By then, the government will hold only a 34 percent stake in the utility company.
Chunghwa Telecom had originally recommended that one global coordinator take charge of the overseas portion of the offerings, claiming that "separate global coordinators unnecessarily complicate the offering process and damage the strength and consistency of marketing messages across regions."
With a sale price of NT$60 per share, the sale of a 19 percent stake in the company would generate nearly NT$20 billion (US$630 million) for the nation's coffers. The global coordinator for such a sale could earn a commission of as large as NT$5.5 billion
However, the technology committee opposed the plan, arguing that "more global coordinators will generate a competitive spirit, and that will help Chunghwa Telecom obtain a better underwriting price."
Legislators noted that many international telecomms giants, such as China Telecom which launched its global initial public offering (IPO) in 1997 and NTT Docomo which launched in 1998, hired more than one coordinator to take charge of their overseas offerings.
Therefore, the company should find one major global coordinator to underwrite no more than 40 percent of the 19 percent overseas portion, the legislators decided.
The remaining 60 percent should be shared by at least two other global coordinators, with each underwriting a portion amounting to at least 10 percent of the overseas portion.
A Chunghwa Telecom official said the decision would complicate the offering process, as the company would now have to find at least three global coordinators.
"This is a very complicated and time consuming process," the official said. "We are running against time because we plan to complete the overseas share sale before the end of next year. If we have to proceed with the committee's plan, we will probably not meet the deadline," he said.
According to the company ,11 banks have approached the company about underwriting the share sale. These included Morgan Stanley, Merrill Lynch & Co, Goldman Sachs Group, Daiwa Securities Group Inc and Salomon Smith Barney Inc.
Although Chunghwa plans to launch its privatization next year, some committee members put forward a proposal that the company increase the domestic portion of the plan, and to reduce the overseas portion to under 10 percent. However the proposal was halted due to disparities between committee members and Chunghwa Telecom.
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