National security a hurdle in opening telecom sector to China

The government is considering allowing Chinese to invest in Type 1 telecommunications businesses, which include fixed line, mobile and satellite communications, which require special permission to be established.

One operator said that if the government goes through with the idea, it will first have to ease public misgivings about the threat such investment might pose to national security.

“The public will worry about security leaks because building a network involves national secrets, and related telecommunications equipment is tightly regulated,” one operator said.

Economics Minister Shih Yen-shiang said Tuesday that “all items are being reviewed” when asked about the government's plan to further ease restrictions on Chinese investment in Taiwan.

According to the Telecommunications Act, foreign investors are not allowed to directly hold more than 49 percent of the shares of Type 1 telecom service providers, and their total direct and indirect stake cannot exceed 60 percent.

Douglas Hsu, chairman of domestic telecom operator Far EasTone Telecommunications Co. Ltd., has said repeatedly that the government should treat Chinese Type 1 telecom service providers the same as other foreign investors or at least allow them 30 to 40 percent stakes.

China Mobile, a major Type 1 telecom carrier in China, reached an agreement with Far EasTone in 2009 to buy a 12-percent stake in the Taiwanese telecom operator at NT$40 per share.

But the deal has been on hold because Taiwan has not yet opened Type 1 telecom services to Chinese investment, prompting Hsu to call for changes in the rules.

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