Taiwan Cellular Corp (台灣大哥大), the nation's second-largest provider of mobile-phone services, will take over its TransAsia Telecommunications Ltd (泛亞電信) unit to help cut costs.
Taiwan Cellular will complete the takeover of TransAsia, which is located in the southern part of the island, in the fourth quarter, said April Hong (
The companies will share one brand name and the same management team.
Taiwan Cellular said in July last year, when it appointed Harvey Chang (張孝威) as its new president, that it would consider taking over TransAsia.
Chang said he aimed to improve the Taipei-based company's ownership structure to help lift profit and enhance the company's appeal to investors.
"It's a good use of cash," said Francis Cheung, an analyst with CLSA Asia-Pacific Markets in Hong Kong. "They will probably integrate their back-office operations first."
The company had NT$4 billion (US$117.6 million) in cash and near cash by the end of last year compared with NT$10.2 billion in 2002, based on Bloomberg data.
Taiwan Cellular has been increasing its stake in TransAsia to the current 97 percent, Hong said.
Taiwan Cellular's sales growth is limited by competition for mobile users in a saturated market. The company and TranAsia had 7.5 million of the 23.1 million customers in Taiwan, where handset subscriptions outnumber the population, according to Ministry of Transportation and Communications statistics for April, the most recent month for which data have been provided.
Taiwan had a population of 22.6 million in March this year.
Chunghwa Telecom Co (中華電信), the nation's largest telephone operator, had 8 million mobile-phone subscribers in April, and third-ranked Far EasTone Telecommunications Co (遠傳電信) had 6.9 million.
Taiwan Cellular has offered severance options to some TranAsia employees. The company expects to realize its first cost savings from the combination of the two companies by next year, Hong said, without offering details.
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