Taiwan Cellular seeking to expand

Taiwan Cellular Corp (台灣大哥大), the nation's No.3 mobile service carrier, has not ruled out the possibility of acquiring another local mobile operator to strengthen its market position, a company executive said yesterday.

"It will depend on the terms," Taiwan Cellular president Harvey Chang (張孝威) told reporters after he was asked about the likelihood of absorbing Taichung-based Mobitai Communications Co Ltd (東信電訊).

A Chinese-language newspaper reported yesterday that Taiwan Cellular plans to buy Mobitai Communications for NT$7 billion, the report said.

"There're all kinds of possibilities," Chang said, declining to elaborate. But in a statement sent earlier to the Taiwan Stock Exchange, the company said the report was ``purely media speculation.''

Shares of Taiwan Cellular Corp (台灣大哥大) dropped 0.63 percent to NT$31.4 on the TAIEX.

With just 700,000 subscribers, mostly in central Taiwan, Mobitai Communications has been seeking partnerships with the nation's major players including Taiwan Cellular, said Teco Electric and Machinery Co (東元電機), the operator's biggest stakeholder.

Teco, a leading Taiwanese television vendor, directly and indirectly owns a controlling 66-percent stake in Mobitai, according to the company.

The expected consolidation comes after a NT$30 billion merger between Far EasTone Communications Co (遠傳電信) and KG Telecommunications Co (和信電訊) last October.

The merger lifted Far EasTone above Taiwan Cellular in terms of size.

The new deal, which would be Taiwan Cellular's second after buying TransAsia Telecommunications Inc (泛亞電信) in 2001, drew only a tepid response from industry watchers.

"Mobitai isn't worth that much. It'll be a costly deal for Taiwan Cellular to catch up to Far EasTone," said Tony Tsai (蔡東松), a director at Taiwan Ratings Corp (中華信評), a local arm of international ratings agency Standard and Poor's.

Stevie Chou (周奇賢), a telecom analyst with SinoPac Securities Corp (建華證券), said he would hold a neutral stance about the consolidation.

"The company is just too small," Chou said. The deal, if struck, would produce only limited synergies, he said.

"It [the consolidation] is bound to occur because there's little room for small operators like Mobitai to survive," he said

The number of Taiwan Cellular subscribers fell to around 7.5 million, after falling about 1 million during the previous few quarters as part the company's efforts to boost average revenue per user by encouraging inactive users to suspend their numbers.

In the first four months of the year, Taiwan Cellular earned NT$1.42 per share, behind Far EasTone's NT$1.56.

"It's true that Taiwan Celluar is uncomfortable being the nation's No.3 mobile carrier. And it is under growing pressure to catch up with its bigger rivals," Tsai said.