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Chunghwa share battle heats up

Lawmakers on Friday told the government to hold 10 auctions of Chunghwa Telecom Co (中華電信) shares at home before offering the stock overseas derailing the government's plans to sell American depositary receipts in the company next month and to privatize it by the end of the year.

"The move will definately impact Chunghwa Telecom complete its privatization plan by the end [of the year]," a Chinese--language newspaper quoted Chang Chia-chu (張家祝), Vice Minister of Telecommunication and Communications, as saying.

Another Vice Minister Tsai Duei (蔡堆) said the legislative decision will affect the state-run phone company's future operations, another newspaper said.

Chunghwa Telecom, facing competition from new fixed-line and mobile phone operators, posted a 13.6 percent year-on-year fall in net profit to NT$10.8 billion (US$309 million) for the first quarter of the year in reflection of higher operating costs including marketing expenses, the company said in April.

Both Chang and Tsai made the remark after a legislative vote on a budgetery bill regarding Chunghwa Telecom on Friday. The KMT and PFP -- which won the vote against the DPP 126 to 86 -- said local residents should have first priority in buying Chunghwa shares. The bidding period should also be extended as long as five months, based on the number of bids, they said.

The move may leave President Chen Shui-bian's (陳水扁) administration's plans to sell an 80 percent stake in the nation's telecom giant in limbo.

"The legislature's decision showed opposition parties are purposely stalling government privatization plans to make it more difficult for the ruling party," said Liu Juming, who manages the NT$5 billion Fund of Funds at Fuh-Hwa Investment Trust Co (復華投信). "The public wouldn't need 10 auctions if they really wanted to buy Chunghwa Telecom shares."

Chunghwa is a tough sell because of cutthroat competition in the nation -- the world's densest mobile-phone market -- and a global slump in the telecom industry.

In April, Taiwan sold 21 percent of the total Chunghwa shares on offer in the final day of a five-day domestic auction only after dropping the floor price. That sale followed five auctions to institutional investors and two sales to individual investors in the past three years, all of which were met with little enthusiasm.

The sale of a 13.5 percent stake in Chunghwa to a group led by Cathay Life Insurance Co (國泰人壽), Fubon Financial Holding Co (富邦金控) and Taiwan Cellular Corp (台灣大哥大) in December was the only time the government sold all Chunghwa shares on offer.

In April, Taiwan filed notice with the US Securities and Exchange Commission that it intends to repackage 214.6 million shares into 21.46 million American depositary receipts.

"Further delays in privatization plans will force the government to raise more debt to bridge the budget deficit, creating a vicious cycle for Taiwan's economy," Liu said.

On Friday, the opposition parties also rejected government plans to sell an NT$54.1 billion of shares in China Steel Corp (中鋼), First Financial Holding Co (第一金控) and Chinese Petroleum Corp (中油).

Taiwan faces record national debt of more than NT$3 trillion (US$86 billion), according to the Directorate General of Budget, Accounting and Statistics.

The government has already budgeted NT$128.4 billion in extra spending this year to expand public works, create jobs and fight SARS in an attempt to revive the economy.
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