The Fair Trade Commission (FTC) yesterday gave the go-ahead to Morgan Stanley Private Equity Asia IV’s (MSPE) NT$74.5 billion (US$2.25 billion) proposal to acquire a significant stake in local cable TV operator China Network Systems Co (CNS, 中嘉網路).
The approval is expected to help Far EasTone Telecommunications Co (遠傳電信), the nation’s No. 3 telecom, complete the last piece of its digital convergence drive, as the company has formed a strategic alliance with MSPE to tap the nation’s cable TV and smart-home markets.
Far EasTone lags behind its local rivals in expanding its reach to cable TV. Chunghwa Telecom Co (中華電信) delivers digital TV services through its multimedia-on-demand (MOD) platform, while Taiwan Mobile Co (台灣大哥大) operates cable TV operator Kbro Co (凱擘).
Photo: Liao Chen-huei, Taipei Times
In June, Far EasTone signed an agreement with MSPE to subscribe to non-convertible corporate bonds issued by the latter’s local subsidiary for NT$17.12 billion. MSPE and several local investors plan to jointly acquire CNS via a newly created equity fund, North Haven Private Equity Asia IV LP (NHPEA).
The commission yesterday said that the acquisition would not hamper competition in the nation’s cable TV market as the deal only involves the transfer of ownership of CNS’ parent company, according to a statement.
Far EasTone and Morgan Stanely’s private equity arm were nearing a US$2.3 billion deal to buy a 60 percent stake in CNS from South Korean private equity firm MBK Partners LP, according to a Wall Street Journal report earlier this year. Far EasTone did not confirm the report.
CNS has a 25.7 percent share of the local cable TV market, with 1.29 million subscribers.
However, the commission is still concerned that Far EasTone could secretly intervene into the operations of CNS as a bond holder in Morgan Stanely’s local subsidiary.
Far EasTone is barred from investing in a cable TV business, as legislators have yet to pass a revision to the Telecommunications Act (電信法) that would relax restrictions on local media investments by political parties, government agencies and the military. Government agencies hold a 2.89 percent stake in the telecom.
To avoid any wrongdoing, the FTC has banned Far EasTone from having direct, or indirect, control over CNS’ eight-member board of directors or from acquiring more than 30 percent of the cable TV operator’s shares. The telecom is also restricted from having a say in CNS’ management, the commission said.
Morgan Stanely’s acquisition of CNS is subject to final approval from the National Communications Commission (NCC) and the Investment Commission.
National Communications Commission Secretary-General Jason Ho (何吉森) said the commission held an administrative hearing on the CNS deal last month, adding that commissioners would soon review the application filed by NHPEA.
“We are aware that the Fair Trade Commission has ruled on the case. Our staff will present their findings on the deal, as well as the ruling from the FTC, to commissioners for further deliberation,” Ho said.
The commission had said in a statement that it would take several factors into consideration when reviewing the changes in CNS’ ownership and its shareholding structure, including whether the deal would facilitate the development of the digital convergence era, ensure the diversity of culture and public opinions, hurt consumers’ interests or change the competitive status of the telecommunications or cable TV industries.
Additional reporting by Shelley Shan
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