The National Communications Commission (NCC) yesterday approved an application from the North Haven Private Equity Asia (NHPEA), a subsidiary of Morgan Stanley Private Equity Asia, to acquire the multiple cable service operator China Network Systems (CNS, 中嘉網路), adding that it must fulfil 20 commitments that it had made to the commission to secure approval.
The decision went against the wishes of New Power Party (NPP) legislators, who urged the commission to suspend the review of this controversial deal and to make any decision before the new legislative session opens next week.
Legislator-elect Huang Kuo-chang (黃國昌) said on Facebook that the decision was simply “unacceptable.”
Photo: CNA
“The commission approved the acquisition despite all the questions surrounding this deal. Asked if the commission would revoke the approval if the buyer breaks its promises, the commission only said that it would fine the buyer according to the law, which is a rather weak statement. This clearly shows that the so-called ‘interim Cabinet’ is only a deceptive term used by President Ma Ying-jeou’s (馬英九) administration to do something more outrageous later. The Legislative Yuan needs to toughen up to stop what Ma is doing to the nation,” he said.
Huang said that one of the controversies in the case was Far EasTone Telecommunications’ (FET, 遠傳電信) role in the acquisition.
As FET secured funding from the government’s four major investment funds, the company then spent NT$17.12 billion (US$507.86 million) on buying corporate bonds issued by NHPEA last year as a way to invest in CNS and succeeded in circumventing laws banning the government, political parties and the military from directly investing in media outlets.
“We want to know if FET has priority in purchasing the shares from CNS if the government loosens the laws preventing the government from investing in the media,” Huang said. “We also want to know if Morgan Stanley simply serves as a financial consultant and helps FET build a shareholding structure to evade the laws in Taiwan.”
Morgan Stanley is obligated to explain whether FET would be involved in the operations of CNS, he added.
Huang said that the commission had approved many cases of media acquisition in the past by asking the buyers to fulfil a list of commitments, but he questioned if it had actually ascertained that the buyers kept their promises.
“FET promised that it would not intervene in the personnel arrangement in CNS. Is that actually so? What would the commission do if the company breaks its promises? All these questions have to be answered first,” Huang said.
Huang also said that lawmakers decided to uphold laws barring investment in media outlets from the government, political parties and the military in the amendment to the three media laws due to several unsettled issues. Approving the deal would mean that the laws are simply useless, he said.
However, commission spokesperson Yu Hsiao-cheng (虞孝成) rejected the NPP’s accusation that the commission had planned to approve the case before lawmakers weigh in on the case.
“We received the application from NHPEA in July last year and spent six months reviewing the case. We have gathered sufficient information and heard opinions from the general public through an administrative hearing, a public hearing and messages left on our Web site,” Yu said, adding: “The commission has been handling the case with caution and did not make the decision in haste.”
Based on the commitments that NHPEA made to the commission, FET is not allowed to dispatch personnel to assume the posts of board directors, supervisors or managers at CNS, nor can it directly or indirectly control the operation of CNS.
FET is neither allowed to serve as a technical or service consultant at CNS, nor to be entrusted with the task of representing CNS or its channels in business negotiations.
In addition, NHPEA promised to invest NT$4 billion to digitize its cable service in the next five years, adding that it would not increase the debt ratio of 12 cable television systems owned by CNS.
CNS would also form an ad hoc task force to monitor if each commitment is fulfilled and to report the company’s progress to the NCC every six months.
The commission said that the 12 cable TV systems under CNS would be punished if they are found to obtain direct investment from FET. Based on current laws, the commission said that it would not agree if FET wants to own shares or invest in CNS.
Economic Democracy Union convener Lai Chung-chiang (賴中強) said on Facebook that a review of the Ministry of Economic Affairs’ Investment Commission would be the last chance to block the deal.
“The Investment Commission is meeting this week ... and could possibly review the case,” Lai said. “It is the last checkpoint.”
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