GigaMedia may merge with rival

ETWebs Inc (東森國際網路), a Taiwan Internet company whose chairman is a KMT legislator, said it is talking to rival GigaMedia Ltd (和信超媒體) to consolidate and improve cable television and high-speed Web services.

ETWebs' statement came after a local Chinese-language newspaper reported that ETWebs will merge with Gigamedia, Taiwan's only NASDAQ-listed Internet company, in a bid to increase its customer base and reduce losses.

The merger will take place "within the next few days," the newspaper said, although it didn't provide further details.

GigaMedia -- owned by the Koos Group (和信集團), which is one of Taiwan's largest business groups with interests in financial services, cement, and cable television -- would be the surviving company after the merger, the newspaper said.

The deal would double Giga-Media's broadband Internet access service to 160,000 subscribers, the paper said. But both parties have yet to decide on a share swap ratio, the newspaper said.

However, in a statement sent to local media later Thursday GigaMedia denied it is close to merging with or buying any company. It is talking to several companies, including ETWebs, about such possibilities, the company said.

GigaMedia said the newspaper report stating that GigaMedia has reached a definitive merger agreement is "incorrect."

It also said GigaMedia's strategic growth plans have always included consideration of possible mergers and acquisitions.

But, "At this time, GigaMedia has not reached definitive plans, agreements or terms with any parties concerning potential mergers or acquisitions."

GigaMedia said last month its loss widened 80 percent in the first quarter as sales failed to cover the cost of running its service. The loss in the three months to March 31 was US$13.3 million, compared with US$7.4 million a year ago, even as sales more than doubled to US$2.7 million.

ETWebs is part of rival China Rebar Group. The group also has interests in financial services and construction, and holds a 30 percent stake in Eastern Broadband Telecom Co (東森寬頻), one of three companies that won a license to offer fixed-line telephone services last year, challenging incumbent Chunghwa Telecom Co (中華電信).

GigaMedia shares fell 2.3 percent to US$1.26 yesterday. The stock has fallen 93 percent in the past year.