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September 26, 2017

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4G ambition f orges ahead as Hon Hai rumored to give up China equipment

TAIPEI, Taiwan -- Regulators yesterday gave the nod to allow Hon Hai's telecoms arm to begin establishing its 4G network amid market rumors suggesting that the approval is the result of the company's willingness to refrain from purchasing China-made equipment.

The National Communication Commission (NCC) yesterday approved a 4G mobile network operation application jointly filed by Hon Hai subsidiary Ambit Microsystems Corp. (國碁電子) and Asia Pacific Telecom (APT, 亞太), ending a dispute about procurement decisions between the companies and regulators.

A dispute over potential security risks erupted earlier regarding Hon Hai's wish to procure network infrastructure equipment from China-based Huawei (華為), which may have hampered the company's regulatory approval progress. Reports indicate that Hon Hai have softened their stance and now intends to purchase equipment made by Nokia, resulting in the swift approval ruling from the NCC.

On numerous occasions, sales of Huawei-made telecoms equipment have been deterred by regulators abroad, including the U.S., for national security reasons related to background of the company's president, Ren Zhenfei (任正非), who is a military technologist in the People's Liberation Army.

Gou Threatens to Withhold Tax

The dispute between Hon Hai and the NCC escalated early last month, with Chairman Terry Gou vowing to delay tax payments if an adequate explanation is not furnished by the regulator within one week.

Ambit Microsystems, however, declined to comment further on retracting their plans to procure Huawei-made telecoms equipment.

Sector analysts stated that Hon Hai is under growing pressure to match Taiwan's big three telecoms operators and launch their own 4G network without further delay. In addition, Taiwan Star Cellular, a new entrant in the telecoms sector backed by Ting Hsin International Group (頂新集團) has announced that its 4G network will be launched before the end of July.

Most notably, NCC's stringent coverage terms requiring carriers to have no less than 250 signal towers before an operation permit may be issued may have compelled the quick reversal in procurement decisions at Hon Hai, said analysts. Hon Hai wishes to complete its acquisition of an estimated 15-percent stake in APT through its subsidiary, which is scheduled to take effect on July 11.

Ambit Microsystems and APT are hoping to consolidate the company's resources to overcome regulatory hurdles and launch its 4G network in the fourth quarter of this year with a 99.45 percent signal coverage rate across Taiwan.

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