III and Chunghwa Telecom Team Up On ICT Venture

Taipei, July 16, 2008 (CENS)--The government-backed think tank Institute for Information Industry (III) and Chunghwa Telecom Co., Ltd. recently decided to set up a joint venture lab to be spun off by III to tap information-communications technology (ICT) market.

Chunghwa's spokesman and chief financail officer, J.P. Hsieh, said developing ICT market had been his company's policy and his company was assessing the cooperation deal. III Chief Executive Officer (CEO) C.S. Ke said the institute's board of directors approved the spin-off project late last year and had hoped to invite more than one strategic investor for this deal. Ke added that Chunghwa was among the enterprises interested in the investment and the details would be nailed down in one or two months.

People familiar with the investment plan pointed out that III would retain a 25% stake in the venture, which is projected to be capitalized at NT$500 million (US$16 million at US$1:NT$30) in initial stage, and Chunghwa would acquire a 40% stake for about NT$200 million (US$6.6 million) before increasing to over 50% in the end. They said the two companies decided to let Chunghwa hold chairmanship of the company after some discussions.

Industry watchers pointed out that the investment would help Chunghwa set up an ICT business covering upstream, mid-stream and downstream sectors. The company is deploying distribution channels in the market via Sena International Co., Ltd., in which it holds partial ownership. III is adept at system integration and development, which are complementary to Chunghwa's telecom-service trade.

III has spun off many of its units into independent organizations. However, none of them handle information-security and national-security business.

Although III has begun severing many of its units as part of its effort to avoid competing with the private sector for government contracts, the cooperation with Chunghwa on the joint venture still draws criticism for scape-goating Chunghwa, a former state-run enterprise still dominating the island's telecom-service market.