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June 28, 2017

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Hon Hai, SoftBank may go after Asia Pacific Telecom

TAIPEI, Taiwan -- Reports emerged yesterday suggesting that Hon Hai Precision Industry (鴻海精密) and Japan's SoftBank are among the list of likely candidates vying to acquire languishing Asia Pacific Telecom (APT, 亞太電信).

According to local reports, Hon Hai intends to expend as much as NT$10 billion to acquire a 22-percent stake in APT from state-run companies and affiliates

Shareholders' Structure Creates a Hurdle

With the telecom carrier's capitalization estimated at around NT$33 billion, Hon Hai is facing the hurdle that 46 percent of APT shares are held among 59,000 members of the investing public, rendering the prospects of acquisition over the open market difficult. Reports indicate that Hon Hai intends to acquire its 22-percent stake in APT from a number of state-run companies and affiliates of the government. Currently, APT's largest shareholders include the Taiwan Railway Administration (台鐵) at 12 percent, the Hua Eng Wire & Cable Co. (華榮電線電纜) at 3.5 percent, and Mega Holdings (兆豐金控) at 3.17 percent.

APT's early financial backers had originally acquired their holdings at prices ranging from NT$20.2 to NT$20.5 per share. Market rumors indicate that APT shareholders have expressed willingness to part with their holdings at a price range between NT$15 to NT$19 per share. Based on APT shares' closing at NT$15.1 last Friday, Hon Hai is expected to furnish NT$11 billion to NT$14 billion to acquire its 22 percent in the company.

APT's current subscribership was last tallied at 2.09 million, and last year it recorded revenues of NT$20.125 billion, generating earnings of NT$0.56 per share. In terms of the planned acquisition, Hon Hai stands to gain APT's network infrastructure assets including 3,000 cellular towers, which will aid the conglomerate's ambitions in the fourth-generation (4G) mobile broadband network, and the following fifth-generation (5G) network on the horizon.

Propelled by the development, Asia Pacific Telecom shares yesterday surged NT$0.85, or 5.36 percent, to close at NT$15.95 early in the session. Shortly after yesterday's opening bell, APT shares reached a high of NT$16.15, following a 7-percent rise, the maximum intraday movement allowed on the TWSE.

Softbank Eyes Foothold Through Acquisition

Meanwhile, reports suggest that high-level executives of Japan's SoftBank, including Chief Strategic Officer Ted Matsumoto, are poised to make a third visit to seek collaborative opportunities, a gesture indicative of the company's resolve to acquire ATP.

Industry experts noted that SoftBank, a global leader in time division long term evolution (TD-LTE) technology, grew more motivated to gain a foothold in Taiwan following regulators' consent to open up the 2.6GHz spectrum and foster development of TD-LTE standard in addition to the frequency division variant (FD-LTE) more popular among local telecoms carriers.

Reports indicate that following SoftBank's acquisition of Sprint Nextel in the U.S. market, the Japanese company has plans to expand its expertise in the TD-LTE standard to major markets where its operations may be found worldwide. Experts said that SoftBank is aiming to acquire ATP because it is Taiwan's sole remaining code division multiple access (CDMA) cellular network and because it has a 4G operating license for the 700MHz spectrum in addition to other existing network infrasctructure assets.

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