KG Telecom abandons FarEastone merger plan

1 Sep 2003

A proposed merger between Taiwanese mobile operator KG Telecom and its larger rival FarEastone has been abandoned. KG Telecom last Friday decided against signing an extension to a letter of intent inked with FarEastone in July, on the grounds that it did not have sufficient confidence in the latter’s ‘willingness to cooperate’. FarEastone called for an extended period of negotiations saying that it needed more time because some foreign stakeholders had altered their plans. It is understood that a decision earlier this month by NTT DoCoMo, which holds around 20% of KG, to postpone a capital increase in the merged entity for at least a year has had an adverse domino effect. US-based AT&T Wireless, a 23% shareholder in FarEastone, was reportedly contemplating selling its stake to DoCoMo through the merger and has now had second thoughts about the terms of the merger. KG’s decision to scupper a union could open the way for a fresh bid for KG from Taiwan’s two largest players Chunghwa Telecom and Taiwan Cellular, both of which are keen to achieve supremacy in Taiwan’s heavily saturated market, where mobile penetration reached 106.15% this year. Both are reported to have expressed an interest in acquiring KG in the run-up to the introduction of 3G services.