Taiwan's parliament adopted a law yesterday that in effect allows foreign investors to take control of fixed-line telecommunications companies through joint ventures with local firms.
Though the law leaves unchanged a rule capping direct foreign investment in fixed-line and other trunk telecommunications service firms at 20 percent, it enables foreign interests to amass stakes of up to 60 percent by linking up with local partners to expand their effective ownership.
The liberalization was the result of years of lobbying by US and European telecom giants to gain access to Taiwan's big but long-closed telephone and data-switching market.
The draft that was submitted to parliament by the cabinet was the fruit of long negotiations between Taiwan and the US that were seen as central to winning US support for Taiwan's bid to join the World Trade Organization.
Officials of the Legislative Yuan said the law now needed only President Lee Teng-hui's (
Deep into a liberalization and privatization drive begun a decade ago, Taiwan opened its mobile telephone market a year ago, setting off brisk international competition that has made wireless phone service cheap and nearly universal.
The next big liberalization will be to end the monopoly now held in fixed-line and other common-carrier services by state-owned Chunghwa Telecom Co, which until its corporatization in the mid-1990s was a stodgy government phone company.
Taiwan recently opened bidding for new islandwide fixed-line telephone franchises, but high capitalization requirements are expected to keep all but the biggest foreign firms out.
Some global giants grumbled privately that the prohibition on foreign control of Taiwan operations was a key market barrier, making major investments unpalatable if not unprofitable.
In an ironic twist, even Chunghwa itself has disclosed plans to sell off part of its own equity -- probably 19 percent -- to overseas telecom partners, reflecting its eagerness to slap itself into competitive form.
Chunghwa currently does about NT$142 billion (US$4.4 billion) of fixed-line local telephone business a year -- a total that is expected to swell as competition spawns new services and drives prices lower.
A McKinsey report in April estimated Taiwan's fixed-line market will grow 11 percent a year after liberalization, with sales swelling to NT$520 billion (US$16 billion) in 2011.
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