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Plan back on track to sell Chunghwa Telecom stake

The government aims to sell a 17 percent stake of Chunghwa Telecom Co (中華電信), the nation's largest telephone operator, in June to help counter a record budget deficit.

Premier Frank Hsieh (謝長廷) said in a telephone interview yesterday that he hopes the sale will take place in the US by the end of June. The government stake has a market value of US$3.4 billion.

The government was forced to scrap plans to sell a stake of more than 15 percent in Chunghwa last year after the company union threatened to strike over a dispute on benefits.

"Union opposition could be a stumbling block for a sale," said Peter Wilmshurst, who counts Chunghwa Telecom shares among the more than US$120 billion he helps manage globally for Franklin Resources Inc from Melbourne, Australia.

"It's been an impediment," he said.

The Ministry of Transportation and Communications, which owns 65 percent of Chunghwa Telecom, aims to cut its stake to less than 50 percent to transfer most of the company to private hands.

The share sale has faced opposition from workers in the company union on concerns that they will lose their benefits as government employees.

Chunghwa Telecom shares fell 0.2 percent to close at NT$64.10 yesterday. The stock has gained more than 9.6 percent in value in the past year compared with a 9.7 percent advance for the benchmark TAIEX. Its US depositary receipts have surged 25 percent in the past year.

Shares of Taiwan Cellular Corp (台灣大哥大), the second largest operator, have risen 0.8 percent in the past 12 months and the stock of Far EasTone Telecommunications Co (遠傳電信) has gained 34 percent in value in the period.

Chunghwa Telecom Workers' Union said no agreement has been reached yet.

"If we can't guarantee our benefits, we'll go on strike prior to the sale," the union's president, Chang Hsu-chung (張緒中), said in a telephone interview.

"The government will compromise with the union," said Michael Ding (丁予嘉), president of Fubon Asset Management (富邦投顧), which counts shares in Chunghwa Telecom among the equivalent of US$6.9 billion under management.

"Some of the workers will lose their jobs," he said.

Taiwan sold a 15.5 percent stake in the company in July 2003 to overseas and domestic investors after auctioning shares earlier in the year.

Chunghwa Telecom, a former government monopoly, isn't as profitable as its biggest rivals by some measures.

On Jan. 18 it had unaudited income for last year of NT$49.9 billion, or about NT$1.8 million in profit from each of its 28,500 workers. Taiwan Cellular had an income of NT$16.7 billion last year, or about NT$11.4 million from each of its 1,463 employees.

Chunghwa Telecom offers fixed-line, mobile and Internet services.

"Fixed line is probably the least profitable for the company," said Jeff Kahng, an analyst with Credit Suisse First Boston in Hong Kong.

"The most logical thing for the company may be to encourage employees to take voluntary retirement," he said.

Taiwan's civil servants can retire at age 50 after 25 years' service. Some Chunghwa Telecom workers may be staying on the expectation the company will remain in the government's control, allowing them to claim pensions after retiring. The pensions will disappear after Chunghwa Telecom is transferred to public ownership.
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