Chang wants simplified finances

Taiwan Cellular Corp (台灣大哥大), the nation's largest mobile phone service provider, plans to sell part of its stake in rival Chunghwa Telecom Co (中華電信) to further simplify its investment structure, a company executive said yesterday.

Taiwan Cellular in December spent NT$27.7 billion, through debt financing, to buy 550 million or 5.76 percent shares of the state-run Chunghwa on the premise that the purchase would help it gain some insight into its biggest competitor.

"As the strategic investment plan seems not able to bring concrete benefits [to us], we are considering dropping it," said Daniel Tsai (蔡明忠), chairman of Taiwan Cellular. The investment plan can't carry on also because the public is suspicious about the alliance between rivals as it may hurt market competition, Tsai added.

The Tsai family-controlled Fubon Financial Holding Co (富邦金控), the nation's largest financial services company, also owns 75 million shares, or a 0.85 percent stake in Chunghwa.

Tsai yesterday made the remarks at a press conference to introduce the company's new president and chief executive officer, Harvey Chang (張孝威).

Chang, 50, is currently chief financial officer of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電). He is scheduled to take up his post at Taiwan Cellular on Sept. 8.

During his first meeting with the media following the Wednesday announcement of his appointment, Chang said he felt an obligation to help improve Taiwan Cellular's corporate governance and simplify its investment structure, as the company is facing a maturing market environment.

"The first priority for me is to deal with the company's complicated cross-ownership and affiliate-investment structures," Chang said.

At present, Taiwan Cellular owns a 10 percent stake in Taiwan Fixed Network Ltd (台灣固網), while Taiwan Fixed Network owns approximately 30 percent in Taiwan Cellular.

To simplify things, Taiwan Cellular plans to buy-back the one-third stake in itself owned by Taiwan Fixed Network, Tsai said.

"Issuing overseas Depositary Receipts is one of the possibilities Chang is considering to make the sale," he added.

Now that the telecom market is rebounding from last year, many international investment banks have expressed interest in Taiwan Cellular, Tsai said.

Meanwhile, Taiwan Cellular is planning to completely taking over its subsidiary TransAsia Telecommunications Inc (泛亞電信). In May 2001, Taiwan Cellular paid NT$13.5 billion in cash to acquire approximately 97 percent shares of the regional operator TransAsia.

"In order to increase the synergy, we don't rule out the possibility of removing the brand TsransAsia," Tsai said.

Taiwan Cellular has nearly 9.05 million users or 32 percent of the market, including approximately 2 million users from the Kaohsiung-based TransAsia.

To make sure the company is well-positioned while maintaining healthy profit margins, Chang said a certain degree of corporate reorganization and restructuring would be needed. For instance, he plans to set up an auditory committee chaired by several independent directors on the board to ensure the company's financial reports are both accurate and transparent.

One telecom-market watcher praised the move, saying the adjustment is expected to improve investors' confidence.

"Taiwan Cellular's complicated investment relationship and low transparency are major concerns for investors," said Gary Lai (賴晴風), a telecom analyst at Insight Pacific Investment Research (月涵證券).