Chunghwa to increase Senao stake

By Kevin Chen  /  STAFF REPORTER

Sat, Mar 28, 2009 - Page 11

Chunghwa Telecom Co (中華電信), the nation’s largest telecoms operator in terms of assets, decided yesterday to purchase 48 million new common shares issued by local handset retailer Senao International Co (神腦國際) via a private placement to further increase the firms’ collaboration.

Through the planned new share issue, Chunghwa will increase its stakeholding in Senao to 40.8 percent from 31.5 percent, the company said yesterday in a statement on its Web site.

In January 2007, Chunghwa bought a 31.5 percent stake in Senao, the nation’s largest handset retailer, for NT$1.06 billion (US$31.4 million) in line with its goal of boosting the numbers of third-generation (3G) subscribers.

Chunghwa said its board of directors decided to buy more shares after recognizing that the business ties between the two companies “have effectively built up Chunghwa’s competitiveness in mobile communications services and significantly increased Senao’s operational results,” the statement said.

“To continue expanding cooperation and the strategic alliance with Senao, Chunghwa’s board reached a resolution today [Friday] to participate in Senao’s private placement by subscribing for 48 million common shares,” the statement said.

The telecoms operator didn’t specify a purchase price for the Senao shares, saying it would disclose the price after the deal has been approved by Senao’s board.

Separately, Chunghwa said in a stock exchange filing that its board also approved a proposal to distribute an all-cash dividend of NT$3.83 per common share.

With the company’s shares closing at NT$62.5 yesterday, the payout of NT$3.83 in cash translates into a dividend yield of 6.13 percent, compared with 6.5 percent and 5.5 percent paid the previous two years, the firm’s previous financial reports showed.

The dividend payout will be subject to shareholder approval at the annual general meeting scheduled for June 19, the company said.

Chunghwa has about NT$80 billion in cash, SinoPac Securities Corp (永豐金證券) estimated last week. With that much cash, the company would be able to decide whether to implement another capital reduction plan or look for suitable investment targets as part of its efforts to better utilize capital as well as reduce cost, Sinopac said.

Chunghwa resumed trading on the Taiwan Stock Exchange on March 20 after completing a 16.5 percent capital reduction to NT$96.97 billion, rewarding shareholders by boosting earnings per share.

Chunghwa is expected to release its fourth-quarter figures and its consolidated financial results for last year on Monday.

Citigroup estimated the firm’s margin in earnings before interest, taxes, depreciation and amortization (EBITDA) to be 44.6 percent in the final quarter of last year, the lowest since 2002 and the third consecutive quarter of EBITDA decline, Citigroup Global Markets analyst Anand Ramachandran said in a client note last Monday.

For the whole of last year, Citigroup forecast Chunghwa would see a 6 percent decline in net profit to NT$45.6 billion.