Far EasTone Telecommunications Co (FET, 遠傳電信) saw its shares dip 1.55 percent yesterday amid speculation that the nation’s No. 3 mobile phone carrier is the front-runner to acquire 4G operator Taiwan Star Telecom Corp (台灣之星) in a deal worth NT$18 billion (US$573 million).
The acquisition, if completed, would mark the biggest 4G tie-up in Taiwan and change the telecom industry’s landscape, as Far EasTone would take the No. 2 spot with subscribers expanding to 8.99 million.
Far EasTone shares tumbled to NT$76.4 in Taipei trading yesterday, slightly regaining some strength from a 2 percent decline in the early session.
Photo: CNA
In the first round of bidding, Far EasTone offered to pay NT$9 billion in cash to Ting Hsin International Group (頂新國際集團) for its 50 percent stake in Taiwan Star, while offering to swap shares with other investors for the rest of Taiwan Star, the Chinese-language Commercial Times reported yesterday.
CTBC Financial Holding Co (中信金控), Cathay Financial Holding Co (國泰金控), Kinpo Group (金仁寶集團) and Central Motion Pictures Corp (中影公司) hold Taiwan Star shares.
Ting Hsin is under pressure to sell its local assets after a series of food safety scares triggered a nationwide boycott of the food conglomerate’s products — even its telecom service.
Far EasTone declined to comment on the speculation, spokesperson Lang Ya-ling (郎亞玲) said yesterday in a statement filed with the Taiwan Stock Exchange.
The potential merger would have a “negative [impact] on Far EasTone’s profit in the near term if the deal goes ahead, but [would be] positive in the long run, given market consolidation from five operators to four,” Yuan Investment Consulting Co (元大投顧) analyst Livia Wu (吳靚芙) said in a report released yesterday.
Wu expects a 30 percent dilution to Far EasTone’s earnings per share after the merger, given a 28 percent downside after net adding Taiwan Star’s losses and 3.6 percent share dilution due to share swaps.
Wu forecasts that Taiwan Star will not see meaningful profit contribution from its 4G business, while its 3G subsidiary, Vibo Telecom Inc (威寶電信), will continue to post an annual loss of NT$3.2 billion this year.
The acquisition would help Far EasTone expand its 4G capacity to 40 megahertz, surpassing larger local rivals Chunghwa Telecom Co (中華電信) and Taiwan Mobile Co (台灣大哥大), which own 35MHz each, Wu said.
Taiwan Star now provides 4G services via its 10MHz at 900MHz spectrum, she added.
Wu kept a “hold-underperform” rating for Far EasTone, as the transaction would not affect the company’s plan to distribute a cash dividend of NT$3.75 per share, which should support its share price at NT$75, the report said.
Commercial Times identified three other bidders for Ting Hsin’s shares: the nation’s largest telecom, Chunghwa Telecom Co (中華電信); Hon Hai Precision Industry Co (鴻海精密), which operates 4G telecom Asia Pacific Telecom Co (亞太電信); and Japanese phone company KDDI.
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