Chunghwa Telecom ready for ADR sale

Despite opposition from lawmakers and labor unions, state-run Chunghwa Telecom Co (中華電信) began marketing a US$2.5 billion overseas share sale yesterday as part of the government's effort to reduce its stake in the firm, a source familiar with the situation said.

The Ministry of Transportation and Communications, the sole controller of Chunghwa Telecom, is selling 125.42 million American Depositary Receipts (ADRs), or a 13 percent stake in Chunghwa, the source said. Each ADR will represent 10 common shares.

The ministry will also sell US$600 million shares, or a stake of 3.1 percent, to domestic investors, according to an e-mail sent to investors by one of the organizers of the sale.

Pricing for the deal was expected in the middle of next week. Goldman Sachs Group Inc, Morgan Stanley and UBS AG are arranging the transaction.

Chunghwa's ADRs will be offered at a discount of 5 to 10 percent on their closing price on Tuesday, when the company stops taking orders for the shares, according to an investor e-mail sent by Morgan Stanley. The domestic shares will be offered at a discount of between 6 and 10 percent, a banker familiar with the sale said.

The news came after the ministry announced on Thursday that it will auction off a 3-percent stake in Chunghwa to domestic investors once the stock market closes on Tuesday.

The news also raised speculation that the company had gained approval from the US Securities and Exchange Commission to issue the ADRs.

Chunghwa yesterday declined to comment on the report.

"We're still checking with the US side. As we haven't received any official notice, I cannot make any comment on the issue," Hank Wang (王漢朝), a company vice president and spokesman, said in a telephone interview.

"Of course we want to start the ADR sale as soon as possible, but this is not something we can control," Wang said.

While the company's share sales, both domestic and abroad, will lower the government's holding to less than 50 percent for the first time since the company was incorporated in 1996, the Chunghwa Telecom Workers' Union (中華電信工會) is strongly opposed to the privatization plan, saying it will mean a loss of jobs and the robust benefits employees enjoy.

"Once the ADR issuance is approved by the SEC, we will have no choice but to stage a strike from Aug. 8 through Aug. 12," union head Simon Chang (張緒中) told the Chinese-language Liberty Times.