Far EasTone considering merge with New Century

Far EasTone Telecommunications Co (遠傳電信), the nation's second-biggest mobile operator, is mulling a merger with fixed-line service provider New Century Infocomm Tech Co (新世紀資通) to join the trend of integrating fixed line, media and mobile services.

The possible acquisition would follow on the heels of Taiwan Mobile Co's (台灣大哥大) plan to take over fixed-line operator Taiwan Fixed Network Co (台灣固網) by April 11, in a bid to boost stagnant revenues and profits.

"It's just a matter of time before we do this [merger]," Far EasTone chairman Douglas Hsu (徐旭東) told reporters.

It makes sense for Far EasTone to merge with New Century amid the global trend of fixed-mobile convergence, Hsu said.

If Taiwan Mobile completes the acquisition as planned, Far EasTone will be the only remaining major domestic mobile service provider not operating both landline and mobile phone services.

Industry leader Chunghwa Telecom Co (中華電信) currently offers users fixed-line, mobile and Internet Protocol TV.

Hsu, however, stressed that "it's a smart move for Taiwan Mobile to launch the reverse takeover, but for us, there's no immediate need [to follow suit]."

In contrast to Taiwan Mobile's situation, Hsu said Far EasTone and New Century were both telecom subsidiaries of Far Eastern Group (遠東集團) and had been collaborating in marketing services.

Hsu also doubles as chairman of New Century, which markets its fixed and broadband services under the Sparq brand.

Because of the possible merger and other investment plans, Far EasTone has not considered capital reduction this year, Hsu said.

Far EasTone said last month that it planned to buy a 51 percent stake in Q-ware Systems and Services Corp (安源資訊), which operates Taipei's Wi-Fi networks and is a telecom affiliate of Uni-President Group (統一集團) for about NT$496 million.

The deal is scheduled to be closed in May.

Far EasTone is in talks with content providers in order to provide richer content to subscribers, president Jan Nilsson said without giving details.

Far EasTone plans to upgrade software at more than 3,000 third-generation (3G) base stations by the end of this year in light of strong demand for its 3.5G, or High Speed Downlink Packet Access (HSDPA), data cards for computer users.

Nilsson said the company's capital spending for this year would be 12 percent of service revenues, which totaled NT$60.47 billion last year.

Meanwhile, the Credit Suisse Group decided to downgrade the nation's telecommunications industry to "market weight" from "overweight" because of a "gloomy outlook" for the mobile market.

"We are becoming more cautious on the Taiwan mobile market" because of pressure on average revenues per month and slow growth in usage, Taipei-based analyst Terry Chan wrote in a report yesterday.

The brokerage rated Chunghwa Telecom "outperform," while Taiwan Mobile and Far Eastone were kept as "neutral."

Additional reporting by Bloomberg