Far EasTone Telecommunications Co (遠傳電訊), the nation's third-biggest mobile phone operator, said yesterday it plans to buy a major stake in fixed-line service operator New Century Infocomm Tech Co (NCIC, 新世紀資通) from Singapore Telecommunications Ltd (SingTel) via a share swap.
Far EasTone would issue 160.37 million new shares in exchange for SingTel's 24.51 percent holding of NCIC, the company said in a statement.
The exchange would give SingTel a 3.98 percent stake in Far EasTone, as well as access to Taiwan's mobile-phone industry. It would also make SingTel Far EasTone's second-largest foreign institutional shareholder after NTT DoCoMo, which has a 4.7 percent stake.
Each Far EasTone share would be exchanged for 6.11 NCIC shares, the statement said.
That meant Far EasTone would be buying NCIC at NT$6.22 per share -- based on Far EasTone's closing price of NT$38 yesterday -- and at a 19 percent discount to NCIC's book value of NT$7.65 per share.
"Far EasTone is taking this action to improve efficiency in the enterprise market as well as in the international phone market," Far EasTone president Jan Nilsson told a press briefing yesterday following the board's approval of the acquisition.
After the deal, Far EasTone's market share in the enterprise area may nearly quadruple from 5 percent now, Nilsson said.
Over the next three-year period, Far EasTone would add NT$1.8 billion (US$54.5 million) in earnings before interest, taxes, depreciation and amortization beginning next year in the wake of the deal, Nilsson said.
The transaction is scheduled to be completed by the end of this year. SingTel may have a seat in Far EasTone's board, Nilsson said.
"This is one piece of the puzzle to fulfill our vision of providing convergent services," Nilsson said.
Far EasTone forecast yesterday that its third-quarter pre-tax profit would dip 2.7 percent sequentially to NT$3.7 billion, while consolidated revenues would rise 6.2 percent to NT$16.8 billion.