Taiwan Mobile boss Jamie Lin has called on regulators to expedite approval of its merger with smaller operator Taiwan Star.

The transaction, announced on December 30, will create Taiwan's second-largest operator by revenue and customer numbers.

But Lin told a media and analysts' call Monday the merger needed to be approved quickly.

Figure 1: Cheek by jowl: Taiwan's mobile marketplace is a crowded place to be, despite the proposed merger.
(Source: Vernon Raineil Cenzon on Unsplash)

"The longer the approval process takes the more negative impact to end users, employees, shareholders and industry interests," he said. "So we are essentially begging the regulators to give us a more expedited answer."

He acknowledged the biggest hurdle is the 100MHz of 3.5GHz spectrum, which exceeds the industry limit. But Lin said the law allowed the regulator to exercise its discretion in the case of a merger.

The company hoped to make the argument to the industry regulator that the extra capacity was necessary to meet the needs of its enlarged customer base.

In the details

Under the terms of the merger, Taiwan Mobile, currently the third-largest operator with 7.1 million subscribers, will issue 282 million of its own shares. Taiwan Star shareholders will hold 7.4% of the enlarged entity.

After the merger Taiwan Mobile will have 9.8 million subs, behind Chunghwa Telecom's 10.7 million. The other big player, FarEasTone, has 7.1 million, with its affiliate Asia-Pacific Telecom reporting 2.1 million.

Lin told analysts that 49% of the benefits of the deal would come from network consolidation, which mostly means the closure of Taiwan Star's 3G network, integration of its 4G network with Taiwan Mobile and the saving on future 5G capex.

A further 31% would derive from greater customer revenue through ARPU growth and cross-selling, with another 20% arising from cost savings, in particular the refinancing of Taiwan Star's debt.

Lin said Taiwan Mobile expected the deal would add about NT$2 billion (US$72 million) in net profit and NT$7.1 billion ($257 million) in EBITDA in the third year after the merger. In the first 11 months of 2021 Taiwan Mobile reported EBITDA from telecom services of NT$22.8 billion ($825 million).

Crowded market

While local media described the announcement of the merger as a bombshell, the Taiwan mobile market is still over-serviced, despite FarEasTone's partnership with APT.

The big three dominate while Taiwan Star and Asia-Pacific Telecom have been trying to survive by selling generous discount plans, such as Taiwan Star's "lifetime unlimited customers."

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Jamie Lin said these were mostly 4G subscribers, but would not disclose how many were on Taiwan Star's books. He said Taiwan Mobile hoped to "upsell" them to other services such as broadband and pay-TV.

Taiwan Star posted a pre-tax loss of NT$1.9 billion on revenue of NT$6.3 billion for the first six months of 2021.

Taiwan Mobile said the two companies hope to complete the deal by September 30 with a final deadline of December 31, 2022.

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— Robert Clark, contributing editor, special to Light Reading