The Ministry of Transportation and Communications will sell up to 10 percent of state-owned Chunghwa Telecom Co (
Executive Vice Minister of the Ministry of Transportation and Communications, Ho-chen Tan (
"We are very confident of achieving the goal of privatization by year end," he said. So far, only 2.9 percent of Chunghwa has been sold to the public, with the aim to sell 50 percent by year end.
The floor price for next month's auction will be determined through a formula set by a price review committee, said the ministry's Director General of Posts and Telecommunications Tony Teng (鄧添來). Details of the formula were not given.
"The price will be completely determined by the market, but we will have to determine if the price is acceptable to the ministry," Ho-chen said.
"If the daily auction price goes down dramatically, then we will stop issuing the shares," he said. "If it is very successful and the issue is not enough, then we will consider a subsequent issue." According to Ho-chen, the ministry has set no top or bottom limit on how many shares will be sold in this round.
"Analysis has shown there is an implied limit to how much can be sold," he said. "We're shooting for 5 to 10 percent." Next month's auction will be the latest attempt in the government's three-year battle to privatize the company. Political and bureaucratic wrangling finally gave way to a 2.9 percent sale of shares in October last year, far less than the government had hoped to sell.
One analyst welcomed the auction move yesterday, but was cautious of the government's pricing policy.
"It seems a sensible way to go since it reduces the risk of any significant burden being on the underwriter," the analyst said on condition of anonymity.
"It's good that they're getting on with it, but they must make sure the price is right," he said. Analysts blame the poor take-up of shares on the ministry's over-optimistic pricing target. Shares were listed on the Taiwan stock exchange on Oct. 27 at NT$104, but closed yesterday at NT$65.5.
The difference in asking price set by the government and that sought by investors has continued to hamper efforts to sell the firm.
In January, the ministry tried to sell shares in the US market in the form of American depository receipts (ADRs) but stopped the sale because the offer price from investors was not high enough.
"The price reached was not satisfactory to the Ministry of Transportation and Communications," Ho-chen said.
He denied, however, that the price was the main problem, instead blaming a lack of communication and understanding among investors as to Chunghwa's real value.
"The price was a little bit of a surprise, but price is not and will not be a major concern," he said.
"The real reason for the delay was that the feedback from 350 potential investors shows that they don't know Chunghwa well enough. Their response was not very friendly," he said.
"Based on that, we felt the price range [sought by the market] was not accurate," he said. "So inadequate communication was the real reason for the delay." Analysts have been loathe to reveal their valuations for Chunghwa shares, but a consensus seems to be forming around the NT$65 to NT$80 range.
That does not mean Chunghwa Telecom can expect to attain such a sale price however.
"If investors don't get some kind of discount, then they will not see any upside to their investment and will not want to buy," said one Taipei-based telecoms analyst.
Even then, such a sale will be difficult given the tough market for telecom shares.
"The market right now is probably not susceptible to a large offering of telecom stock," another analyst said.
The ministry still hopes to sell 13.8 percent through ADRs sometime this year. Other options for share sales include a "citizen's sale" open to Taiwanese investors, and strategic partnerships with overseas telecom companies.
"We have had signs that international operators would like to take an anchoring position in Taiwan," Ho-chen said.
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