Chunghwa Telecom Co Ltd (
The state-run telecommunications giant awarded the NT$7.1 billion (US$218.3 million) for telecommunications equipment for use with the ADSL system. Each of the 1.26 million hook-ups represents a new high speed Internet subscriber.
ADSL is a technology for transmitting digital information at a high bandwidth on existing phone lines to private homes as well as businesses.
"Chunghwa chose the Alcatel consortium because they gave us the best price, NT$5,600 per subscriber setup," said Chen Chun-ming (
Alcatel, a French telecommunications powerhouse, will supply back office infrastructure equipment and Taiwan's Ambit will supply ADSL modems and routers for the contract.
"With this contract, [Ambit] could be the largest ADSL modem supplier in Taiwan and probably in the whole of Asia," said Sharon Su, analyst at ABN AMRO Securities.
Shares in Ambit rose NT$11 on the Taiwan Stock Exchange to end the day at NT$179 in response to news of the deal, limit up. Shares in Tecom Co (
Not all analysts agreed on how profitable the deal would be for the Taiwanese firm. At NT$5,600 per ADSL modem system, the profit margin is very low. The only chance the company will have to eke out a profit is by squeezing component suppliers when sourcing for parts.
By comparison, Chunghwa paid about NT$7,000 per ADSL system when it awarded a contract for 1.2 million ADSL connections to a consortium of Lucent and local firm Zyxel Communications Corp (
This year the tandem of Ericsson and Zyxel dropped out of bidding over concerns there was no money to be made in the deal.
"NT$5,600 is a really low price ... extremely low," said Frank Lee, senior analyst at Indosuez W.I. Carr. "In terms of revenue, however, this will be very significant for Ambit."
Ambit, which manufactures a number of electronics components -- predominantly notebook computer power modules -- had total sales last year of around NT$11 billion.
The added NT$7.1 billion revenue from the Chunghwa deal will provide a significant boost to their revenue, Lee said.