Regulators stymie Hon Hai takeover of APT
By Ted Chen, The China Post
May 29, 2014, 12:06 am TWN
TAIPEI, Taiwan -- Industry commentators yesterday stated that the union between Hon Hai Precision Industry Co. (鴻海) and Asia Pacific Telecom (APT, 亞太) may be impeded by regulatory hurdles.
Hon Hai on Tuesday finalized its bid to acquire APT, with its wholly owned subsidiary Ambit Microsystems (國碁電子) sealing the deal by subscribing to a 70-percent portion, or 582 million shares out of the 826.4 million shares issued by APT in a private placement, effectively becoming the company's largest shareholder with its 14-percent stake.
As the acquisition concludes, Ambit as the merged company will be dissolved, with APT rendered the surviving company. Regulatory guidelines, however, dictate that no single telecom operator may claim portions greater than one-third of a bandwidth spectrum.
Both companies participated in last year's heated fourth-generation (4G) mobile broadband network operating license auctions, with each securing blocks in the 700MHz and 900MHz bandwidth spectrum. APT secured a 10MHz block in the 700MHz spectrum, while Ambit secured a 20MHz block. Combined, the two companies currently hold a 30MHz block, exceeding regulator limits that no single operator may hold more than one-third, or 25MHz of the 75MHz bandwidth between the 700MHz and 900MHz frequency spectrum.
Citing the Regulations for Administration of Mobile Broadband Access Business (行動寬頻業務管理規則), the National Communications Commission (NCC) yesterday stated that the two companies are in violation of guidelines as their hold on the bandwidth blocks between the 700MHz and 900MHz frequency spectrums exceeds the one-third limit.
The NCC, however, stated that it will examine the situation and that concessions may be made, in accordance with their findings. The NCC reiterated its pledge to uphold its mission of maintaining an environment of fair competition in the market, fostering the development and advancement for the telecommunications industries, and preserving consumers' interests, while indicating that its office remains the arbiter on rulings relating to the consolidation of network frequency blocks in the union between Hon Hai and APT.
Hon Hai yesterday stated that it will strive to meet regulatory requirements, and cooperate with the NCC in submitting filings of all requested information.
In addition, the Regulations for Administration of Mobile Broadband Access Business also stipulates that all applicants for 4G operation may not hold shares exceeding 15 percent in another 4G applicant. Reports indicate that Hon Hai and APT are not in violation of the clause as following the acquisition of 582 million APT shares, Hon Hai's is holding a 14.99-percent stake in APT, just below regulatory limits.
Meanwhile, foreign institutional investors stated that the traditional big three telecom carriers, Chunghwa Telecom (中華電), Taiwan Mobile (台灣大), and Far EasTone Telecommunications (遠傳) may face heightened competition from APT, which is backed the deep-pocketed Hon Hai.