Thu, Jan 06, 2005 - Page 11 News List

Far EasTone takes over Arcoa for launch of 3G

By Lisa Wang  /  STAFF REPORTER

Far EasTone Telecommunica-tions Co (遠傳電信), Taiwan's No.2 mobile carrier, yesterday announced it would acquire a majority stake in its channel partner for NT$1.2 billion in preparation for the launch of its third-generation (3G) mobile service next quarter.

The acquisition of handset chain store Arcoa Communication Co (全虹) will help Far EasTone untangle the patchwork of isolated, underused infrastructure and applications to create a set of services to support the 3G debut, analysts said.

Far EasTone will obtain a 55.3-percent stake, or 74 million shares, in Arcoa at NT$16.26 a share, the phone company said in a statement.

The offer amounts to a 20-percent premium on Arcoa's book value of NT$13.61 a share.

"A major factor behind the purchase is to increase our service network to pave the way for the commercial operation of 3G service in the second quarter. Our distribution network is not intensive enough, especially in remote areas," said Yvonne Lan (藍綺萍), spokeswoman for Far EasTone.

The deal will boost Far Eas-Tone's directly-owned outlets to 350 from the current 100 retail outlets.

The number of outlets is not the only thing that matters. Lan said that well-trained salespersons are crucial for telecom operators in promoting 3G technology by providing face-to-face instructions.

The next generation technology features rich multimedia functions and will allow users to surf the Internet, stream real-time videos, watch movies and send data at high speeds.

After the integration is completed, Far EasTone will have Arcoa's 1,000 salespersons provide service to its 8 million mobile subscribers.

The deal, however, will bring a huge change to Arcoa's operations, Lan said. Arcoa will retain its name and will be allowed to provide services for subscribers beyond Far EasTone, she said.

Commenting on the acquisition, Lu Chia-lin (呂家霖), an analyst with Yuanta Core Pacific Securities (元大京華證券), said buying a channel player was certainly a shortcut for telecom operators wanting to get a more cost-effective start for the 3G service launch.

"Far EasTone's distribution network will double at least overnight after the acquisition wraps up," Lu said.

"NT$16.26 a share is a good deal," he said.

Compared with opening direct outlets, buying the existing channel network will save costs and reduce risk to a minimum, Lu said.

But mobile users would be able to enjoy better service at telecom company direct outlets like those of most European phone companies, such as French 3G operator Orange, he said.

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