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.
"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, , News Editor, Light Reading