Shares of Far Eastone boosted by CNS deal

The China Post - - TAIWAN BUSINESS -

Shares of Far EasTone Telecom­mu­ni­ca­tions Co. ( ) moved higher Fri­day morn­ing af­ter it clinched a deal a day ear­lier in prepa­ra­tion to ac­quire a stake in Tai­wan-based ca­ble op­er­a­tor China Net­work Sys­tems Co. (CNS, ), deal­ers said.

The buy­ing re­flected op­ti­mism to­ward Far EasTone’s busi­ness prospects, with the com­pany ap­par­ently de­ter­mined to in­te­grate its tele­com net­work with ca­ble TV ser­vices to cre­ate ap­pli­ca­tions for the smart home mar­ket, they said.

As of 11:09 a.m., shares of Far EasTone had added 4.18 per­cent to NT$74.70 (US$2.37), with 6.47 mil­lion shares chang­ing hands. The weighted in­dex on the Tai­wan Stock Ex­change was down 0.17 per­cent at 8,636.44.

“Af­ter yesterday’s re­bound, the broader mar­ket is fall­ing back to­day,” Ta Ching Se­cu­ri­ties In­vest­ment Con­sult­ing an­a­lyst Eric Lai said. “So in­vestors rushed to pick up tele­com stocks, like Far EasTone, due to their de­fen­sive char­ac­ter­is­tics.”

“The deal which paved the path to ac­quire a stake in CNS gave in­vestors a strong in­cen­tive to buy Far EasTone shares soon af­ter the lo­cal bourse opened,” Lai said.

“The deal is help­ing Far EasTone shares, which had lagged be­hind the mar­ket, to play catch-up on the main board this morn­ing,” he said.

In a news con­fer­ence on Thurs­day, Far EasTone an­nounced that it has signed an agree­ment with Mor­gan Stan­ley Pri­vate Eq­uity Asia (MSPE Asia) to buy bonds to be is­sued by MSPE Asia unit North Haven Pri­vate Eq­uity Asia IV LP (NHPEA).

NHPEA, which is also owned by sev­eral Tai­wanese in­di­vid­ual and in­sti­tu­tional in­vestors, will in turn buy a 60-per­cent stake in CNS from South Korean pri­vate eq­uity firm MBK Part­ners LP.

Far EasTone said it has reached a con­sen­sus with MSPE Asia to con­trol the man­age­ment of CNS through the ac­qui­si­tion of cor­po­rate bonds to be is­sued by NHPEA.

The bond pur­chase is ex­pected to cost Far EasTone NT$17.12 bil­lion, and the debt will carry a ma­tu­rity of seven years.

Be­cause gov­ern­ment agen­cies cur­rently own a 2.89-per­cent stake in Far EasTone, the com­pany must re­spect ex­ist­ing reg­u­la­tions that bar po­lit­i­cal par­ties, the gov­ern­ment and the mil­i­tary from hav­ing stakes in media en­ti­ties.

The bond strat­egy is ex­pected to help it skirt the reg­u­la­tions.

Far EasTone said that if the ban is lifted, it will di­rectly own a stake in CNS.

The Na­tional Com­mu­ni­ca­tions Com­mis­sion has pro­posed the eas­ing of the re­stric­tions to al­low po­lit­i­cal par­ties, gov­ern­ment agen­cies or the mil­i­tary to own up to 5 per­cent of a lo­cal media com­pany’s eq­uity.

But the bill still needs to be passed by the Leg­isla­tive Yuan.

“CNS is the largest ca­ble TV op­er­a­tor in Tai­wan. The deal shows Far EasTone’s am­bi­tions to ex­tend its reach to ca­ble TV oper­a­tions and in­te­grate ca­ble TV with its tele­com net­work,” Lai said.

“Although the deal needs to pass reg­u­la­tory scru­tiny, Far EasTone has made the right de­ci­sion to move into the smart home busi­ness. It’s a pos­i­tive step for the com­pany’s fu­ture de­vel­op­ment,” Lai said.

Ac­cord­ing to Far EasTone, CNS has 1.29 mil­lion cus­tomers in Tai­wan.

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