Telenor Seeks 40% of Taiwan's KG Telecom

Telenor is seeking to acquire a 40% stake in LG Telecom of Taiwan.
Telenor, Norway's dominant telecommunications company, said it is one of several telcos interested in buying a 40% stake in privately owned KG Telecom of Taiwan. KG Telecom, owned by the Koos Group, is one of Taiwan's leading wireless operators. Other potential bidders include NTT DoCoMo, Deutsche Telekom and Telstra of Australia.

Under Taiwanese law, foreign investors are allowed to own 40% of a Taiwanese company. In August the Koos Group bought back 20% of a stake held by Bell Canada for $485 million. Now the company is anxious to sell the full 40% stake to the highest bidder.

The market is ripe for consolidation. Six mobile operators have licenses to provide services in Taiwan, although only four have licenses to provide nationwide coverage: Far EastTone, Chunghwa Telecom, Taiwan Cellular Corp.and KG Telecommunications Ltd.

"We are looking at several opportunities in the Taiwan market and KG Telecom is one that is of interest to us," says Sigve Brekke, managing director of Telenor Asia.

About 14.3 million Taiwanese have mobile phones, representing a penetration rate of 68% of the Island state's 21 million population. Far Eastone is seeking to acquire regional rival Mobitai Communications following Far Eastern Textile Ltd.'s purchase of 4.25% stake in Mobitai for NT$510 million ($16.3 million). Far Eastone plans to sell at least 10 million of its 1.2 billion shares in an initial public offering next year.

The Taiwan government is set to detail plans for selling so-called third-generation (3G) licenses that offer consumers access to the internet through handsets capable of delivering data at high speed, by the end of the year.

Follow-on investment

Telenor seems determined to step up its investments in Asia. In May, Digicom, one of Malaysia's largest cell-phone companies, said Telenor, together with tycoon Vincent Tan, bought 29 million shares from smaller holders at M$7.60 ($2.00) per share, bringing Tan's stake to 32.93%. Telenor paid $44 million for its 23 million shares to bring its stake to 32.98%

Earlier in May, Telenor agreed to buy 24.9% in United Communications Industry of Thailand, one of Thailand's biggest phone companies, and 30% of its Total Access Communications subsidiary for $720 million.

One banker said he expects the stake to fetch about $1 billion. BNP Paribas is reportedly advising the Koos group on the sale, but the bank declined to comment.

Meanwhile, KG Telecom is pressing ahead with plans to become the country's leading third-generation network. LG Telecom and handset-maker Nokia began building out the first stage of its $520 million GRPRs network (a half-way point between 2G and 3G) in April.

"In order to meet the demands of the future, third-generation information and multimedia services are the next important milestones," says KG Telecom.


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