Far EasTone prepares local IPO

Far EasTone Telecommunications Co Ltd (遠傳電信), one of Taiwan's mobile phone service firms, announced Friday that it received formal approval to list its shares on the TAISDAQ, Taiwan's Over-the-Counter Stock Exchange. Analysts expect a strong showing.

Officials from the Over-the-Counter Commission and Securities and Futures Commission formally approved the company's application for a share listing on May 29, and the company can list at any time within the next six months. If it does not list within six months, Far EasTone will have to go through the entire application process again.

Far EasTone plans to offer 10 million shares to the public in Taiwan at what the company terms the "earliest suitable date based on market conditions." One of the main reasons for the local listing is that Far EasTone is reportedly preparing for an American depository receipt on the NASDAQ.

The company may run into trouble with the listing, however, as the Taiwan Stock Exchange has remained weak amid sluggishness in global markets. Telecom issues have been particularly hard hit worldwide, but investors are beginning to take notice of the light debt loads of telecommunications companies in Asia.

Third-generation telecom licensing auctions in Europe drove up the debt burdens of a number of firms, as bidding wars drove the prices of licenses into the stratosphere. 3G mobile Internet licensing auctions in Britain and Germany netted a combined US$78 billion for the governments of those nations, but critics say the high toll placed an undue financial burden on mobile systems operators.

In Japan, 3G licenses were given away at no charge, with an eye to develop that nation into a worldwide powerhouse in mobile telephony. The country oversaw a `beauty contest' to ensure each company was developing a high quality network. South Korea, Taiwan, Hong Kong and Singapore have also worked to drop the prices of their licenses, and investors believe Asia will benefit from the move.

In Taiwan, questions remain over the viability of telecom issuances primarily due to the failure of Chunghwa Telecom Co's (中華電信) listing and the poor performance of Taiwan Cellular Corp (台灣大哥大) shares, Taiwan's top mobile phone company.

The share price of Chunghwa Telecom was sent reeling from a listing price of NT$104 down to Friday's close of NT$59. Taiwan Cellular dropped from its initial public offering price of NT$86 down to Friday's close of NT$44 per share.

Hong Kong and Shanghai Banking Corp (HSBC, 香港上海匯豐銀行) telecom analyst Carl Berrisford believes the Far EasTone listing should be able to maintain a stable price since its major shareholders will be unable to sell any portion of their stake within a year's time.

Far Eastern Textile Corp (遠東紡織) holds 53 percent of Far EasTone's shares and AT&T owns a 21 percent stake. Only an estimated 20 percent of Far EasTone shares are held by companies able to cash in as soon as it lists on the bourse.

When Taiwan Cellular was listed on the stock market, over 50 percent of its shareholders were able to sell their stakes immediately, because they did not meet Securities and Futures Exchange lock-in requirements.

Changes in Taiwan's telecommunications laws should also help the Far EasTone listing. Foreign investors are currently permitted to directly own only 20 percent of a Taiwanese telecommunication company.