Chunghwa Telecom Co (中華電信), the nation's largest telecom company, decided to reduce its planned overseas share sale in July to 8 percent, with prices range between NT$46 and NT$53 each, a government official told the Taipei Times.
"We plan to sell an 8 percent-stake in Chunghwa," said Wang Ting-Chun (
The Ministry currently owns a 79.4 percent stake in the state-run telecom company after several share auctions since 2000. The government aims to complete Chunghwa's privatizations by year-end and to reduce its shareholding to below 50 percent.
Chunghwa previously planned to sell 13.8 percent of the company's shares in the form of American Depositary Receipts in mid July.
After doing some market researches, the ministry decided to cut it to 8 percent.
"[But] we may increase the figure when market reaction was enjoyable," Wang said. The maximum shares sale is 13.8 percent, he said.
One industry watcher said the proposed price is attractive.
"Compared with the NT$51.5 Chunghwa's closing price on Friday, a more than 10 percent discount to NT$46 is attractive," said Andy Chang (
In an effort to sell shares in slow economy in the recent years, Chunghwa was forced to cut share prices below half from its initial offer at NT$104 per share in 2000.
Chunghwa's stable revenue return also drew interests from foreign institutional investors, Chang said.
The company reported a NT$4.48 earning per share in 2002, jumped 16 percent from NT$3.86 in the previous year, and is expected to achieve NT$4 per share this year.
Opposition from the telecom giant's work union is a hurdle for the share sale.
Last week Chunghwa announced to delay plans to buy back 10 percent of its outstanding shares to sometime in the second half of the year.
Originally the company hopes to fulfill the re-purchase plan before its ADR sale.
The plan was altered because of opposition from the union who has three representatives on the company's 15-member board.
"We are disappointed to announced the delay, however, we will keep negotiating with the union," Chunghwa chairman Hochen Tan (
The share buyback aims to lift shareholder's earning by reducing issued capital and to strengthen the efficiency of capital use, Hochen explained.
However, the union asserted the buyback is designated to benefit the government rather than shareholders.
"The intention of the buyback is to fill government coffers which can then be used to finance President Chen Shui-bian's (陳水扁) presidential election campaign in March," Chang Hsu-chung (張緒中), president of the Chunghwa Telecom Workers Union said in a statement last week.
Taiwan has so far faced more than NT$3 trillion in government debt, according to statistics provided by the Directorate-General of Budget, Accounting and Statistics.
Chang criticized that Chungh-wa's plans to borrow NT$50 billion from banks to fulfill the buyback plan will furthermore undermined the company's bottomline.
But a Taiwan Ratings Corp (
"For years Chunghwa has used minimal debt and its strong operating cash flow has been able to cover most of its capital spending," said Tony Tsai (蔡東松), an analyst at Taiwan Ratings, a local arm of Standard & Poor's. "Chunghwa is expected to easily payback the NT$50 billion loan within two years without hurting its finance."
According to Taiwan Ratings' latest report on Chunghwa in December last year, the telecom company's total debt to capital to is only 6 percent. Taiwan Ratings rates Chunghwa's long-term corporate credit ratings of "twAAA/twA-1."
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