The government hopes the third time's a charm in its latest attempt to unload shares of state-run Chunghwa Telecom (中華電信). It plans to sell 5.7 percent of the nation's largest phone company on June 13, in an effort to chip away at the government's growing budget deficit.
"I'm not very optimistic about this. If they want to sell right now, they may have to sell at a bigger discount -- even a double digit discount -- and bring the price down into the NT$40s [per share]," said George Wu (
Bureaucrats hope to raise about NT$28 billion (US$813 million) by selling as many as 550 million shares at NT$50.8 per share, only a slight discount to its NT$51.5 closing price on the bourse yesterday.
Those wishing to participate in the auction-style share sale must hand over a NT$3 billion deposit to qualify for the bidding. The government said in a statement that proceeds from the sale will go toward paying down this year's budget deficit, which is estimated at around NT$327 billion.
"They have already planned this share sale several times, but they have delayed. The government's position is they don't want to sell Chunghwa shares for under US$2 a share," Wu said.
With the stock market pulling back from highs reached earlier in the second quarter, now is not a good time for a share sale, he said. Telecom companies in general have not been very attractive investments ever since they overloaded on buying new equipment during the Internet bubble a few years ago, Wu said.
This will be the third time the government has tried to sell shares of Chunghwa, and analysts are not optimistic about its chances.
Last June, the government was able to sell around a third of the shares on offer, as bureaucrats refused to lower the price to a level investors found attractive. At the time, officials deducted nearly 2.5 percent off the listed price of Chunghwa shares, yet the upcoming sale is discounted by only 0.3 percent, based on yesterday's closing price.
Chunghwa shares have lost around 50 percent of their value since the state-run giant listed on the bourse in late 2000 at a price of NT$104 per share. The government had hoped to unload 33 percent of the company by the end of last year, but failed to do so. After two previous share sales, nearly 95.4 percent of Chunghwa's shares remain in government hands. Primasia's Wu believes the government would do better to wait on the sale, "but they have already factored in the capital from the sale in the government's budget this year," he said.
Although he is not upbeat on the share sale, Wu said Chunghwa should increase profits by 14 percent year on year this year, as its mobile-phone services and ADSL Internet broadband lines bring in higher margins.
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