Far EasTone Linked With $2.3B Move for Taiwan Cable Co

The Taiwanese operator is reported to be involved in a consortium looking to pay $2.3 billion for control of China Network Systems.

Iain Morris, International Editor

July 6, 2015

3 Min Read
Far EasTone Linked With $2.3B Move for Taiwan Cable Co

Taiwanese mobile operator Far EasTone Telecommunications is poised to announce a $2.3 billion deal to acquire China Network Systems, the country's biggest cable TV company, according to a report from the Wall Street Journal (WSJ) (subscription required).

Citing people familiar with the situation, the WSJ reports that Far EasTone Telecommunications Co. Ltd. is bidding in a consortium that includes the private equity division of Morgan Stanley as well as several Taiwanese investors.

The parties are said to have already signed a memorandum of understanding with a view to announcing an agreement in the next few days.

China Network Systems is currently controlled by an Asian private equity fund called MBK Partners, which has previously failed to sell the cable company to Taiwanese investors due to what the WSJ describes as "separate issues" regarding prospective buyers.

One buyer appears to have become embroiled in a food safety scandal that upset negotiations with MBK Partners, according to the WSJ report.

A takeover of China Network Systems would allow Far EasTone to add a substantial broadband and TV business to its mobile offerings and provide further evidence of the convergence trend that is sweeping the telecom industry.

Operators globally are looking to acquire fixed and mobile assets so they can provide the full range of communications and entertainment services to consumers, and defend their businesses against rivals selling bundles of services at discounted prices.

Want to know more about pay-TV subscriber trends? Check out our dedicated video services content channel here on Light Reading.

"Integrated communications have become a trend among companies in recent years," said Far EasTone in its recent annual report. "Major players in the communications market are competing against one another in the hope of becoming the top dog."

In 2010, Far EasTone paid 20.81 billion New Taiwan dollars ($673 million) to take full ownership of a fixed-line business called New Century InfoComm Tech Co (NCIC), in which it previously held a 26.74% stake, but it has subsequently struggled to make an impact in the country's fixed-line market.

In its recent annual report, the operator complained that incumbent Chunghwa Telecom Co. Ltd. (NYSE: CHT) still controlled as much as 94.6% of the fixed telephony market, while NCIC's share of the residential broadband market was just 3%.

Accounting for 64% of revenues of NT$94.18 billion ($3.04 billion) in 2014, Far Eastone's mobile business, by contrast, claimed a 25.2% share of customers, serving nearly 7.4 million subscribers at the end of the year.

China Network Systems reportedly serves more than 1.3 million TV customers and more than 250,000 broadband customers.

Shares in Far Eastone closed up 1.36% on the Taiwan Stock Exchange on Monday.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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