Taiwan Cellular says its profits to boom this year

Taiwan Cellular Corp (台灣大), the country's second-largest provider of mobile-phone services, said this year's profit may rise as much as 30 percent after new management bought rivals and sold assets.

The integration of its TransAsia unit and sale of a stake in larger Chunghwa Telecom Co (中華電信) would increase profit, Chief Financial Officer Cheng Hui-Ming (鄭慧明) said in an interview. A 30 percent gain would boost net income at the Taipei-based company to NT$17.3 billion (US$510 million) from NT$13.3 billion last year.

Taiwan Cellular is rebounding from two years of falling profits, after the company's biggest shareholders hired Harvey Chang (張孝威) last year from Taiwan Semiconductor Manufacturing Co (台積電) to stem the decline. In a market where handset subscriptions outnumber the population, Chang has concentrated on boosting earnings by unwinding cross-shareholdings to improve efficiency.

"There's been an enormous shareholder revolt," said Devan Kaloo, who counts stock in the company among the US$6 billion he helps invest for Aberdeen Asset Management in Singapore. "Returns for shareholders have improved."

Taiwan Cellular shares have gained 12.5 percent on the Taiwan Stock Exchange this year. The shares down NT$0.2 to closed at NT$33.3 yesterday.

Taiwan Cellular's net income in the first half rose 32 percent to NT$8.3 billion from the same period a year earlier. The company's results improved after shareholders in the company installed new management, investors said.

Daniel Tsai (蔡明忠), a scion of the nation's second-wealthiest family who became acting chairman at the phone company last year, hired Chang as president in the second half. Chang, formerly chief financial officer at Taiwan Semiconductor, recruited Cheng, 49, who started with Taiwan Cellular in November.

Tsai, now chairman at Taiwan Cellular, is also vice chairman of Fubon Financial Holding Co (富邦金控), Taiwan's third-biggest financial services company. The Tsai family in July last year bought about 75 million shares, or a 1.7 percent stake, in Taiwan Cellular from Verizon Communications Inc. The purchase gave the family about a 10th of Taiwan Cellular at the time.

President Chang has known Cheng for more than two decades, when both were working in the country's financial industry.

The new management at the company has pledged to unwind cross-shareholdings and reorganize the company to help lift profit and attract investors. Taiwan Cellular will complete the takeover of its TransAsia unit, a cell-phone operator. The companies will share the same management team.

"Income from TransAsia has improved quite substantially," said Cheng, who declined to give details. "We also have a little bit over NT$1 billion from the Chunghwa Telecom disposal this year."

Taiwan Cellular in January raised about US$185 million selling about one quarter of its stake in Chunghwa Telecom, the nation's largest phone operator.

Taiwan Cellular still owns 200 million shares, with a market value of NT$11.3 billion, in Chunghwa Telecom. The stake will be sold, Cheng said, without giving a timeframe.

The company increased its average revenue per user, or ARPU, to NT$827 per month in August from NT$753 in December. It has cut about 1.2 million subscribers to focus on users who add to profit. Chunghwa Telecom has increased its ARPU to NT$740 per month from NT$719 per month earlier this year by increasing business subscribers, company Chairman Hochen Tan (賀陳旦) said last month. Taiwan Cellular is asking customers to pay more per month to qualify for discounts on purchases of new handsets. The company offers an average subsidy per phone of about NT$2,400. But the company still needs to improve ARPU, according to one analyst.