Chunghwa share sale flops

The government failed to sell a 5.7 percent stake in Chunghwa Telecom Co (中華電信) yesterday, receiving only one bid from a foreign company. This was the third such auction in two years in a government effort to privatize the state-run giant.

The Ministry of Transportation and Communications refused to disclose the identity of the foreign investor and the bidding price.

"The foreign bidder has provided a bank guarantee of NT$3 billion [US$88 million] issued by a foreign lender," ministry spokesman Tsai Duei (蔡堆) said.

"We were unable to confirm the validity of that document," he said, citing time zone differences in verifying data with foreign banks.

The ministry, which owns 95 percent of the nation's largest phone company, offered 550 million shares at a floor price of NT$50.80 a share, pricing the holding at NT$28 billion (US$824 million).

The share sale was another attempt to alleviate a ballooning government budget deficit.

Analysts said the weak response was expected.

"Domestic and foreign investors are currently not keen on the telecom market and lack the confidence to invest," said George Wu (吳裕良), an analyst at Primasia Securities in Taipei. "If they can bring the price down to below NT$50 per share, more investors might show an interest," he said.

Chunghwa reported NT$18.2 billion in sales last year, down from NT$18.7 billion in 2000.

Nathan Lin (林宗賢), an analyst at National Securities Corp (建弘證券), said the company may see 5 percent growth in sales this year, although this is below the growth-rate forecasts for other mobile-phone-service operators.

"Chunghwa's business structure is more complex than other mobile-phone services," Lin said.

Chunghwa's sales for international calls last year dropped 32 percent over 2000.

"This has a strong impact on the company's earnings," he said.

Chunghwa's shares may rise later in the year, Lin said.

"The stock market will start to gradually rebound and then jump in the fourth quarter," Lin said.

"Chunghwa can even set their floor price at NT$55 per share if they hold off the auction until the fourth quarter," Wu said.

The government originally planned to sell 33 percent of Chunghwa by the end of last year. Only 4.66 percent of the company's share are currently controlled by non-ministry investors.

Chunghwa employees own 0.12 percent, foreigner investors own 0.44 percent and several insurance and trust companies hold the remaining 4 percent.

Chunghwa shares closed up 1 percent yesterday at NT$55, with almost 8 million shares trading hands, the biggest volume since mid-April.

The auction is scheduled to continue next Tuesday.