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Chunghwa plans to buy stake in Vietnamese carrier

"Vietnam is a very attractive market because the population is bigger than Taiwan and penetration is low, so there's growth potential."

Elinor Leung, an analyst at CLSA Ltd in Hong Kong

Chunghwa Telecom Co (中華電信), the nation's largest telephone company, is in talks to buy a stake in a Vietnamese carrier as sales stagnate in its home market.

"We hope we will have something in the first half," chairman Hochen Tan (賀陳旦) said in an interview in Taipei last Monday, declining to name the target company. "It's still in the negotiation process."

Expanding into Vietnam, Southeast Asia's fastest growing economy, may help Hochen spur growth after Chunghwa's sales in the last four years failed to exceed 2 percent in a market where phone subscriptions exceed the island's 22.9 million population. Japan's NTT DoCoMo Inc and Singapore Telecommunications Ltd have also said they're interested in investing in Vietnam.

"Vietnam is a very attractive market because the population is bigger than Taiwan and penetration is low, so there's growth potential," said Elinor Leung (梁向奕), an analyst at CLSA Ltd in Hong Kong who rates Chunghwa "buy." "Competition is tough there though, with lots of price cutting."

Sales and profit at the Taipei-based phone operator, which generates almost all its revenue from the island, will remain "about the same" this year, compared with last year, Hochen said. Sales rose 1.1 percent to NT$186.3 billion (US$5.7 billion) last year, the company said on Saturday.

Vietnam's economy last year expanded 8.5 percent, the fastest pace since 1996, led by manufacturing and services, according to government data. Foreign direct investment jumped to more than US$20 billion last year, from US$12 billion a year earlier, according to the nation's government.

"Vietnam certainly is one of the fast emerging markets, so we give good attention to it," Hochen said.

Vietnam Military Telecommunications Corp, or Viettel, is the country's largest mobile-phone operator, based on the 25 million registered subscribers the company said it had at the end of last year. Vietnam Mobile Telecom Services Co, or MobiFone, is the second biggest, with more than 13 million registered users, followed by Vinaphone Telecommunication Services Co, with 12 million. All three carriers are based in Hanoi.

About seven companies in Asia and Europe, including Singtel and Vodafone Group Plc, may seek to buy a stake in MobiFone when it holds an initial public offering this year, Managing Director Le Ngoc Minh said in November. NTT DoCoMo, Japan's largest mobile-phone operator, said in November the company wants to invest in a Vietnamese operator.

Viettel has not had any discussion with Chunghwa about the Taiwanese company taking a stake, said Nguyen Thanh Xuan, a spokeswoman in Hanoi. Mobifone's Minh declined to comment on any possible discussions with Chunghwa.

Vinaphone is not in talks with Chunghwa on a share sale, according to Le Trong Tuan, an assistant to the company's managing director.

The Taiwanese operator is preparing to enter the wireless broadband Internet market in Southeast Asia through a venture with Taiwan's Global Mobile Corp (全球一動), which holds a license to offer services based on the so-called WiMAX technology in Taiwan, Hochen said. Malaysia is the most promising market in the region for the WiMAX technology, he said.

The phone company 36 percent owned by the government will transfer about 10 percent of its property and equipment assets to a new real-estate management division this quarter and may sell shares in the unit in Taiwan and overseas after at least three years, he said.

"In the long run, that can be one of our major incomes," Hochen, 57, said.

The carrier had NT$329 billion in plant, property and equipment at the end of September.

Chunghwa plans to increase cash returned to shareholders should the government ease limits on special dividends and stock cancellations, Hochen said. The company's cash pile increased to 12 percent of assets by the end of September, up from 1 percent at the end of 2001, according to data compiled by Bloomberg.

The phone-service provider has received "good signs" from the government it may increase during the first quarter the amount Chunghwa can pay in special dividends, Hochen said. Still, an actual so-called capital reduction may not occur this year, he said, without elaborating.
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