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Far EasTone may reduce capital to boost efficiency

"Reducing capital will be a faster way to boost capital efficiency and to significantly boost earnings per share."

Daniel Hsiao, a telecom analyst with Taiwan Ratings Corp

Far EasTone Telecommunications Co (遠傳電信), Taiwan's second-largest mobile operator in terms of subscriber numbers, yesterday said the company was considering reducing capital as part of efforts to boost capital efficiency.

With abundant free cash flow and low debt ratio, reducing capital would be "one option" to better handling the company's assets, Far EasTone president Jan Nilsson told reporters during a luncheon in Taipei.

But, Nilsson said the proposal would need approval from the company's board. He didn't specify when the board will meet to discuss the proposal.

Currently, Far EasTone has capital of NT$38.73 billion (US$1.18 billion), or NT$3.87 billion in outstanding shares, and is the smallest among the nation's three major mobile carriers including Chunghwa Tele-com Co (中華電信) and Taiwan Mobile Co (台灣大哥大).

According to the company, Far EasTone posted revenue of NT$9.4 billion for the first half of this year and was minus 6 percent in debt, which means the company had more cash on hand than outstanding debt.

It is an issue faced by all of the nation's major telecom operators -- how to better handle an abundant cash flow -- said Daniel Hsiao (蕭黎明), a telecom analyst with Taiwan Ratings Corp (中華信評), the local arm of the rating agency Standard & Poor's.

"Reducing capital will be a faster way to boost [the firm's] capital efficiency and to significantly boost earnings per share," Hsiao said.

The nation's top phone company Chunghwa Telecom pared down its capital by 2.03 percent to NT$94.56 billion last month from a previous high of NT$96.48 billion through a share buy-back program.

Making investments outside the company's core business would be another way to increase profits as the nation's telecom market was nearing saturation, Hsiao said, adding that Chunghwa Telecom and Taiwan Mobile were looking overseas for expansion.

Separately, Nilsson also said Far EasTone, or its major shareholders did not have any plan to sell more shares this year through issuing global depositary receipts (GDRs).

Far Eastern Textile Ltd (遠東紡織) said late on Monday that it now owns about 2.91 percent of Far EasTone after selling about 80 million common shares in the form of GDRs through its affiliates at a small discount of 1.73 percent. The deal was worth US$82.55 million.

Far EasTone shares remained unchanged at NT$35.3 on the Taiwan Stock Exchange at the close of trading yesterday.
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