NTT DoCoMo is reportedly considering scaling back an estimated TWD30 billion investment in a merger of two of Taiwan’s wireless operators. DoCoMo had been expected to take a 20% stake in the amalgam of Far EasTone and KG Telecom, possibly by buying AT&T’s 23% stake in Far EasTone. DoCoMo has itself been an investor in KG Telecom since the late 1990s, holding a 21.4% stake in the company. However, according to reports in the Financial Times, the Japanese company is coming under pressure from shareholders to not invest too heavily in overseas operations, having recently written down JPY900 billion worth of foreign investments. DoCoMo is believed to want to delay its decision on whether to take a fifth share of the enlarged company until the end of the year, a move which could mean that AT&T will look elsewhere for another purchaser. If NTT DoCoMo does not choose to up its investment in the merged company, its stake will be diluted to between 5% and 10%.
Far EasTone and KG Telecom signed a memorandum of understanding in mid-July and had been expected to complete the deal this month. However, DoCoMo’s indecision is expected to extend the process by at least a month. Under the terms of the agreement Far EasTone agreed to pay USD876 million in cash and shares for the KG Group. The tie-up would put Far EasTone in a better position to compete with Chunghwa Telecom Co and Taiwan Cellular Corp, with the three each holding roughly a third of the Taiwan market in terms of mobile subscribers. At the end of June 2003, Taiwan was home to 25.11 million wireless subscribers, representing a cellular penetration rate of 114%, the highest of any country anywhere in the world.