Far EasTone, KG Telecom merger talks fail

Merger talks between Taiwan's No. 3 and No. 4 mobile-phone service companies Far EasTone Telecom-munications Co (遠傳電信) and KG Telecommunications Co (和信電訊) have collapsed, Chinese-language media reported yesterday.

Far EasTone seemed likely to merge with KG Telecom as long as the two companies could agree on a on stock-swap, reports said.

But while talks did happen, one official denied that discussions were still ongoing.

"We did have discussions with KG Telecom earlier this year. But for the past two months no further talks have taken place," said Yvonne Lan (藍綺萍), a spokesperson for Far EasTone.

In February, when KG Telecom dropped out the 3G license competition, the company approached Far EasTone, she said.

"There are no merger talks between Far EasTone and KG Telecom, or any other companies for that matter, at this time," KG Telecom said in a statement yesterday.

Far EasTone has about 4 million subscribers and KG Telecom claims nearly 4.2 million.

If combined, the commercial entity would surpass Chunghwa Telecom Co's (中華電信) 7.2 million customers and become the nation's largest mobile-phone operator.

Chinese-language media also speculated that Japan-based telecom giant NTT DoCoMo was the matchmaker behind the potential deal.

The report said NTT DoCoMo -- a major shareholder in both KG Telecom and Far EasTone -- was planning the move in a bid to get a piece of Taiwan's third-generation mobile-phone business.

FarEasTone is also invested by US-based AT&T Wireless and has a 3G license. Market watchers said that money was the pivitol issue in the discussions.

"There was a significant gap between how much Far EasTone would like to pay and how much KG Telecom would be willing to sell for," said George Wu (吳裕良), an telecommunications-industry analyst at Primasia Securities Co in Taipei.

KG Telecom seems unlikely to hand over management to outsiders.

"The telecom business plays an important role in the Koos Group (和信集團), and the family always prefers to be at the helm," said Alex Wu (吳興國), an analyst at China Securities Corp (中信證券).

The Koos Group controls a 60 percent stake in KG Telecom.

With the recent launch of its i-mode wireless Internet service in mid-June, sales at KG Telecom have been gradually rising, so the company may choose not to sell to or merge any time soon, Wu added.