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No bidders show up at Chunghwa Telecom sale

Taiwan failed to sell a NT$28 billion (US$824 million) stake in Chunghwa Telecom Co (中華電信), its fourth flop in two years of trying to move the nation's largest phone company toward private ownership. No bidders showed up.

The government, which offered 5.7 percent of the company for a second time in less than a month, needs the money to help plug a NT$327 billion budget deficit. It probably will have to slash the price if it wants to sell the stake, analysts said.

"It's going to be a tough sell," said Richard Ferguson, an analyst with Nomura Securities. "There's little demand for telecommunications stock offerings now because of the depressed state of the industry."

The share sale of Chunghwa has been haunted by a global slump in telecommunications shares, by competition driving phone rates lower and by concern that Chunghwa has yet to shake the mentality and operating style of a government bureaucracy.

Standard & Poor's Telecommunications Services Index in New York has tumbled 36 percent this year.

Still, Chunghwa Chairman Mao Chi-kuo (毛治國) said he holds to hopes of an overseas sale of shares as early as the September quarter.

"That's still an ongoing process, although it's been postponed for some time," he said.

The government initially said it would sell two-thirds of the state-owned company by the end of last year. The initial public offer of a 15 percent stake in September 2000 -- at twice the current sale price -- ended 98 percent unsold. A foreign sale of shares was twice scrubbed. In June 2001, only a third of a 5 percent stake on offer was sold.

The fourth straight failure may cause the company and its bankers to rethink timing and price for the planned sale of American depositary receipts in the US.

"We decline to comment," said Pete Rose, a spokesman for Goldman Sachs Group Inc, which along with Merrill Lynch & Co and UBS Warburg is advising on the overseas sale.

Yesterday's auction, a repeat of a failed June 13 attempt, kept the stake size and price intact. The government eased qualification procedures after a lone bidder, never identified, was rejected in the earlier round because of inadequate paperwork.

"No one submitted a bid," said Wang Ting-Chun (王廷俊), a section chief in the Ministry of Transportation and Telecommunications.

The government wants to lower its stake in Chunghwa to 34 percent from almost 95 percent. The NT$50.8 price per share set by the government was a 4.2 percent discount to yesterday's market price.

The government signaled it might have a buyer when it announced last week that it would require only a letter of credit, not a bank account statement, for a bidder to qualify in yesterday's auction.

Chunghwa shares fell 2.8 percent, ending at NT$52.5 yesterday.
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