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Legislators seek to block sale of Chunghwa shares

"The nation has so many children who have no money to pay for their lunch, so many dangerous houses that need to be fixed, and yet we are using money to support street dance festivals." — Huang Chao-shun, Chinese Nationalist Party legislator

Legislators on the Transportation Committee passed a resolution yesterday barring the Ministry of Transportation and Communications (MOTC) from selling shares of Chunghwa Telecom (中華電信) to help raise funds for domestic construction projects.

Jointly proposed by Chinese Nationalist Party (KMT) Legislator Lee Hung-chun (李鴻鈞) and Democratic Progressive Party (DPP) Legislator Yeh Yi-chin (葉宜津), the resolution came after the MOTC had proposed selling about 659.8 million, or 6.9 percent, of its shares.

While non-binding, the resolution would likely compel the ministry to reconsider the plan.

MOTC Minister Mao Chi-kuo (毛治國) said the sale was expected to generate revenues of approximately NT$52.8 billion (US$1.7 billion).

In the resolution, the lawmakers said that the sale would reduce the percentage of state-owned shares in Chunghwa to below 34 percent, which was the most appropriate corporate share distribution suggested by the supervisory committee for privatized state-run organizations. Lawmakers also said the shares were initially a state asset and that the ministry had failed to submit a comprehensive plan on how the sale should be executed.

The MOTC holds 35.65 percent of Chunghwa shares and is the company’s largest shareholder. About 21 percent have been sold to US investors in the form of American Depository Receipts. Foreign investors own 45 percent of Chunghwa shares.

Less than 2 percent are owned by Cathay Financial Holding Co (國泰金控), while about 1 percent is owned by the Fubon Financial Holding Co (富邦金控).

Mao said yesterday that the ministry had been asked to list NT$52.8 billion on its budget to help implement the Executive Yuan’s plan to expand domestic demand.

As foreign investors are not allowed to hold more than 50 percent of Chunghwa shares, only 4 percent of the shares could be sold to foreign investors this time, he said.

Mao said that should the remaining 2.9 percent be sold to domestic investors, they would not be sold to specific corporations with the after-hour fixed price.

Mao said that selling shares is only one of the many options available, adding that Chunghwa would also increase its capital before later decreasing it, a measure that will boost the company’s earnings per share (EPS).

As the largest shareholder, the ministry was expected to receive NT$7 billion in revenues through the increase in EPS, while the other NT$45.8 billion could be raised by issuing debt, he said.

“In that case, the target sum may not be entirely obtained through the sale of Chunghwa Telecom shares, nor would it change the percentage of state-owned shares,” he said. “The number of shares that will actually be sold is subject to change.”

Mao said that Chunghwa now has NT$74.7 billion in cash and has operated without any debt.

Lawmakers, however, said the Executive Yuan must review all proposed domestic projects submitted by counties nationwide before they kill the “golden goose.”

“I strongly oppose the plan,” KMT legislator Huang Chao-shun (黃昭順) said.

Huang pointed to the items on the government’s to-do list to boost domestic demand, including funding activities such as street dance festivals.

“The nation has so many children who have no money to pay for their lunch, so many dangerous houses that need to be fixed, and yet we are using money to support street dance festivals,” Huang said.

“What makes us different from the DPP if that’s the best we can offer the public?” she said.

In response, Executive Yuan Spokeswoman Vanessa Shih (史亞平) said the resolution was “acceptable” as the MOTC was considering raising a loan using its Chunghwa Telecom shares, which lawmakers said was a better fund raising option.

ADDITIONAL REPORTING BY SHIH HSIU-CHUAN
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