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Union plans to sue Chunghwa Telecom over sale of shares

The labor union at Chunghwa Telecom Co (中華電信) plans to file a lawsuit against the company today in a last-ditch effort to avert a planned overseas share sale, the head of the union said yesterday.

Chunghwa Telecom's board earlier this month agreed to a proposal to sell a maximum of 1.64 billion common shares -- around a 17-percent stake of the company's total shares -- mostly in the form of American Depositary Receipts (ADR).

This is in accordance with the government's long-term plan to privatize the state-owned telecom carrier by lowering its holdings to below 50 percent by year's end.

"Giving the nod to the share sale, the company's management has gone against a resolution made by the legislature to hold the share sale, and that is against the interests of the company's shareholders," said Simon Chang (張緒中), head of the Chunghwa Telecom Workers' Union (中華電信工會).

The union is expected to sue Chunghwa Telecom's management and its biggest shareholder, the Ministry of Transportation and Communications, for breaching trust, Chang said.

"We hope the lawsuit will raise concerns at the New York Stock Exchange about Chunghwa Telecom's flawed corporate governance when it reviews the ADR issuance," Chang said.

Chunghwa Telecom last month hired Goldman Sachs, UBS AG and Morgan Stanley to manage the overseas share sale.

"We can't judge now how the lawsuit will impact on the review, but one thing that's certain is that the union's fight is in vain," said Tony Tsai (蔡東松), a senior analyst with Taiwan Ratings Corp (中華信評).

A resolution made by legislators on the matter would not result in any legal restrictions on share sales, he said.

Chunghwa Telecom's shareholders are expected to approve the board's proposal to issue a NT$4.7 cash dividend for last year's financial result during a shareholder's meeting today.
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