Time to attempt another Chungwha stake sale

20 May 2004

The Taiwanese government has said that it plans to sell a 14% stake in PTO Chunghwa Telecom by the end of the year, as part of its plans to reduce its 64% holding in the operator. The stake is worth about TWD75.6 billion (USD2.3 billion) but is expected to be sold ‘at a small discount’, according to an investment manager involved with the telco.

The full privatisation of Chunghwa Telecom has been a priority of the Taiwanese government for some years, but efforts to attract investors have thus far yielded little success. The state managed to sell just 4.62% of the telco after numerous attempts in 2000 and 2001, whilst in December 2001 the proposed divestment of a further 66% of the company was postponed altogether. In late 2002 the Legislative completed the highly contentious sale of a 13.5% tranche for TWD65.6 billion (USD1.88 billion) to a group led by Chunghwa’s rival mobile operator TCC. In July 2003 the state offloaded 11.5% of the company in the US through an IPO on the New York Stock Exchange to reduce its holding to around 64%. A further sale attempt was cancelled last November, amid continuing criticism from parliament and the industry watchdog, Control Yuan, of the earlier share sale to the TCC consortium. Many critics have argued that the sale favoured a select group of bidders representing conglomerates’ interests, and claimed that retail investors were not given enough time or information to prepare for the auction.