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Chunghwa set to reel in shares

Chunghwa Telecom Co (中華電信) plans to buy back and cancel as much as 10 percent of its outstanding shares ahead of an overseas share sale that could raise about NT$67 billion (US$1.9 billion).

The company was due to hold a board meeting yesterday to decide whether to go ahead with the buyback and how many shares to repurchase, chairman Hochen Tan (賀陳旦) said at the company's annual general meeting.

The government, which owns about 80 percent of the company, plans to sell 13.8 percent of the company in the form of American depositary receipts next month, a stake that would be worth about NT$67 billion based on yesterday's closing price.

The share buyback, which would cost about NT$49 billion based on the current share price, would raise more revenue for the government and lift Chunghwa Telecom's per-share earnings, helping to make next month's overseas sale more attractive to buyers.

"This will help improve shareholder value," said Hochen, who said the company would hold a roadshow for the overseas sale at the end of this month.

"How can we answer investors two weeks from now if we don't do this?" he said.

The overseas sale includes a 1.8 percent greenshoe option, which allows an underwriter to increase the number of shares issued in the 30 days after trading starts when there is strong demand for the offering.

A group of investment banks led by Goldman Sachs Group Inc will manage the overseas share sale, the company said.

Chunghwa Telecom employees who attended the shareholders' meeting said they opposed the proposed buyback.

"This will hurt corporate governance," said Chang Hsu-chung (張緒中), president of the Chunghwa Telecom Workers Union.

Chang said the main reason for the plan was boost President Chen Shui-bian's (陳水扁) chances of re-election next year.

The overseas share sale comes after five fizzled auctions of Chunghwa Telecom stock to institutional investors and two dud sales to individual investors in the pat three years.

The company has proved a tough sell for the government because of competition in the world's densest mobile-phone market and a global slump in the phone industry.

The government, which needs to raise revenue to plug a NT$237.4 billion budget deficit, is going ahead with the overseas share sale after the legislature passed a resolution last month requiring it to hold 10 auctions for investors at home before offering Chunghwa shares to institutional or private investors.

The government says the legislative decision applied only to domestic share sales.
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