Chunghwa share sale postponed - yet again

27 Nov 2003

The latest attempt by the Taiwan government to privatise its national PTO Chunghwa Telecom were derailed again yesterday when the state pulled the plug on a planned auction of 180 million shares worth an estimated USD265 million, amid continuing criticism of an earlier share sale. The surprise move came after parliament and the industry watchdog, Control Yuan, once again criticised the sale of 13.5% of the telco to a group led by rival mobile operator TCC, Cathay Life Insurance and Fubon Financial Holdings, which paid TWD65.6 billion (USD1.88 billion) for the stake in late 2002 – the state’s biggest asset sale to date. Opponents argue that the sale favoured a select group of bidders representing conglomerates’ interests as retail investors were not given enough time or information on the auction, prior to it taking place.

The decision to scrap the auction marks the latest in a long line of problems undermining Chunghwa’s protracted privatisation. The government held an initial public offering of Chunghwa shares in 2000, promising to sell a third of the company, but these efforts came to nothing, and in December 2001 it missed a new deadline to sell 66% of the company. Following the sale of a 13.5% tranche to Cathay Life in late 2002, in February 2003 the government said it was to sell between 1.3% and 5% of the company in March, raising up to USD778 million in the process, in a sixth attempt to kick-start its privatisation. On 3 March 2003, however, the auction of 100 million Chunghwa Telecom shares – equivalent to 1% of the company – began hesitantly when just 1.01 million shares were sold in the first day, raising TWD52.5 million. There were bids for almost 41 million shares but the vast majority fell short of the government’s TWD52 per share floor price. Then in July the state offloaded a further 11.5% in the US through an IPO to reduce its holding to around 64%. However, its target of reducing this to below 50% by the end of 2003 through after-market-hours tenders and private placements is looking increasingly less likely.