Cathay Life Insurance Co (國泰人壽), the nation's biggest insurer, may bid for a minimum NT$31.9 billion (US$917 million) stake in Chunghwa Telecom Co (中華電信) as the government tries today for a fifth time to sell shares in the phone company.
"We will evaluate it," said Lee Chang-ken (
"The dividend is quite good, but the amount of funds required is quite big," Lee said.
Bidders must offer to buy at least half of the NT$63.8 billion of shares, or 13.5 percent of Chunghwa, on sale as the government tries to plug a budget deficit and refinance record national debt.
Investors last week said the auction might flop because the NT$49.10-a-share price was above market value. No bidders showed up at the last two auctions.
Chunghwa shares rose 1.5 percent, posting their biggest gain in six weeks and matching the sale price for the first time since the auction was announced on Dec. 8.
A local newspaper yesterday reported that Taiwan Cellular Corp (
A successful bidder of 7 percent of the company shares will be able to secure a seat in 15-member board of directors, the paper said.
"We have no comment on rumors," said Irene Chi (
Cathay Life, which took a NT$7 billion one-time charge for the first nine months of the year to provide for equity losses, has been squeezed by the need to pay high guaranteed returns on older policies as interest rates and stock markets have tumbled.
* Chunghwa lures potential buyers with dividends that could reach 9.2 percent next year.
* Bidders must offer to buy at least half of the shares. This would grant 13.5 percent ownership of the state-run telecom giant.
* Share price of the offer is above market value.
* Chunghwa faces fierce competition in the ISP market.
* Purchase of 7 percent grants a spot on the company's board.
"Cathay's return on investment hasn't been so good in recent years," said Cheng Yi-sheng, who helps manage US$11 million at Taiwan Securities Co (
"The dividends from Chunghwa would provide a better return than any other investment in Cathay's portfolio," Cheng said.
Chunghwa's sale prospects have been hurt by competition in the fixed-line, Internet access and cellphone markets.
In the world's densest cellphone market, with 105 handsets for every 100 people, Chunghwa trails Taiwan Cellular in users.
Last week, a government report said Chunghwa's 2003 profit may drop as much as 22 percent. The phone company faces new rivals Asia Pacific Broadband Wireless Communication Inc (亞太行動寬頻) and Taiwan PCS Network Inc (聯邦電信) in the first quarter and its hold on the overseas call market slipped to 60 percent this year when it lost its monopoly to three new operators.
"I would never buy Chunghwa Telecom shares," said Charles Hsu, who helps manage US$20 million for First Global Investment Trust Co (
"Chunghwa Telecom is not a growth stock," Hsu said.
Net income at the phone company may slide to NT$38.6 billion in 2003 from an estimated NT$49.5 billion this year, according to a Cabinet report presented to the legislature. Sales will probably drop 3.5 percent to NT$186 billion, it said.
At the same time, subscribers are spending less. Per-user spending on mobile services is forecast to fall to NT$717 this year from NT$818 in last year. High-speed Internet access service is expected to produce NT$159 less per person.
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