The Ministry of Transportation and Communications (MOTC, 交通部) yesterday announced a floor price of NT$104 per share for the sale of a 3 percent stake in state-run Chunghwa Telecom (中華電信).
The announcement drew a mixed response from local analysts, however, with some saying the price was too high and would not inspire interest among investors while others claimed it was fair.
The decision set the NT$104 floor price for an auction-style sale of Chunghwa shares to domestic institutional investors and qualified foreign institutional investors (QFII), who will have to bid for the stocks.
Of the 289 million shares to be auctioned, the minimum investor bid is five, while the maximum share purchase will be 5,000.
The auction is scheduled to go ahead within two weeks after which the MOTC will progress with its plan to sell off a 21 percent stake in Chunghwa; 15 percent via public subscription and a reduced 3 percent offer to employees.
Originally employees were to be offered a 5 percent stake in their company, but Chunghwa president Lu Shueh-jing (呂學錦) explained that as this offer had been made on an assumption of NT$60 per share, their share would be cut to 3 percent.
This surplus would be added to the amount set to be offered via public subscription, boosting it from 13 percent to 15 percent, he said.
According to one analyst, who requested anonymity, the price has been set at fair market value but leaves little room for it to gain, and therefore it will probably not interest QFIIs.
"A reasonable price would be in the range of NT$70 to NT$80 providing about NT$20 upside for investors as fair value should be around NT$100 to NT$105," he said.
"The government should leave some money on the table for investors," he said. It is still likely, however, that local investors will probably dip into their pockets for the stocks.
The analyst said that the value of Chunghwa will be affected by increased competition in the fixed-line market, where it will maintain its monopoly for only a few more months.
The recent granting of fixed-line licenses to three "well established, well capitalized firms ... will see Chunghwa lose market share," as its monopoly evaporates, he said.
But another industry analyst, who also requested that his name not be used, disagreed saying that the price was reasonable and that despite the looming competition in the fixed-line market, Chunghwa will remain well-positioned.
"The company is still sitting in a relatively strong position if you look at the amount of subscribers it has, the quality of the subscriber base and its network," he said.
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