Far EasTone to Acquire KGT

TAIPEI -- Two leading mobile operators in Taiwan, Far EasTone ("FET") (ticker: 4904) and KG Telecom ("KGT"), today signed a letter of intent to merge.

According to the letter of intent, KGT shareholders will be offered to convert one KGT share into 0.46332 FET share plus NT$6.864 in cash. In total, KGT shareholders will receive approximately 806 million FET shares and NT$11.9 billion in cash.

The merger of FET and KGT will change the landscape of Taiwan's telecom industry. Currently, FET and KGT have a combined subscriber base of 7.7 million, on par with Chunghwa Telecom and Taiwan Cellular, creating a strong three-player situation in the Taiwan mobile market. The combined operating revenues of FET and KGT exceeded NT$56 billion in 2002, which propelled it to the No. 2 position in the mobile services industry.

FET chairman Douglas Hsu said, "FET and KGT both boast a large and loyal customer base, a good brand image, a premium network as well as innovative and diversified product and service offerings. By leveraging our strengths, we have the opportunity to create synergies and achieve a win-win situation where the sum is greater than the parts combined. In particular, FET's Super i-style intelligence commerce platform and its Br@vA multi-media services, as well as KGT's i-mode are already the industry-leading mobile data services. As Taiwan enters the 3G era, the merger will strengthen our leading position in the 3G mobile services market." In addition, both companies will endeavor to safeguard the interests of the employees.

KGT chairman Leslie Koo emphasized, "the merger of KGT and FET is a landmark transaction, heralding the beginning of a new era for Taiwan's telecommunications market. KGT has a strong track record in operating 2.5G wireless data services and FET owns the 3G licenses and technology. The two companies make a perfect match in terms of our focus on talents, corporate image, product positioning, business concept and mobile communications visions. FET is an ideal partner to KGT as far as our shareholders and employees are concerned. It is expected that the new post-merger entity will surpass Taiwan Cellular in monthly revenue to become the No. 2 telecom operator in Taiwan and a new leader in the Taiwan telecommunications industry."

FET and KGT are expected to sign a definitive agreement in the near future and relevant procedures will be followed to ensure successful completion of the deal. Through the signing of the letter of intent, the two parties have already agreed on key terms such as pricing and will start due diligence immediately. Although the companies cannot guarantee that a definitive agreement will be reached, nor can they guarantee that the merger will be consummated, both sides are optimistic about the eventual combination of the two companies. Nonetheless, shareholders and investors are advised to exercise caution when dealing in FET and KGT shares. FET and KGT will give due notice according to the progress of the merger deal and relevant legal procedures.

Far EasTone Telecommunications Co. Ltd.

KG Telecommunications Co. Ltd.