Far EasTone-KG Telecom merger approved

Dec 05, 2003 Ι Industry In-Focus Ι Electronics and Computers Ι By Ken, CENS
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Taipei, Dec. 5, 2003 (CENS)--The Cabinet-level Fair Trade Commission yesterday approved the Far EasTone Telecom-KG Telecom merger, helping the combined business body run much closer to its domestic two major rivals in cellular-service competition than when they were separate organizations.

Far EasTone and KG Telecom are currently Taiwan's third-largest and fourth-largest cellular suppliers, respectively, with a respective market share of 17.1% and 14.1% as of September this year. After the merger, their combined business turf will represent 31.2%, closely following No. 1 provider Taiwan Cellular's 34.5% and No. 2 player Chunghwa Telecom's 31.5%.

Considering the merger will not affect fair competition status in Taiwan's cellular-service market, the commission gave its green light to the deal.

The two telecom providers decided to merge in two stages at their October 7 board meetings. In the first stage, KG Telecom will merge with a Far EasTone subsidiary, which will be the survivingl company and unconditionally take over all the rights and obligations of the perishing KG Telecom. After the merger, the Far EasTone subsidiary will be 60% held by KG's original shareholders and 40% by Far EasTone. The combination is scheduled to be completed by Jan. 1 next year.

In the second stage, Far EasTone will wholly own the subsidiary through a 100% stock swap with the subsidiary. In this process, KG's original shareholders will give Far EasTone its stocks of the subsidiary in exchange for Far EasTone shares. The swap will be held on May 15 next year.

The two companies resumed the merger plan in early October after a short breakup since they first announced the plan in July. The deal is estimated at NT$29.6 billion (US$870 million at US1:NT$34) through a swap of each KG share for 0.4632 Far EasTone share and NT$6.72 in cash.

Far EasTone and KG Telecom had a combined revenue of NT$29.3 billion (US$862 million) in the first half this year. The companies emphasized that they will not scrap all of the preferential rates and services offered before the merger and have planned a new management team for the consolidated body.
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