Far EasTone makes KG an offer

Taiwan’s third-largest cellco Far EasTone [PNK: FEOTF] confirmed yesterday that it is in talks to take over its rival KG Telecom, in a deal that would see the merged company overtake Chunghwa Telecom to become the market’s second-biggest player. According to local press reports, Far EasTone is offering TWD12 or 0.65 of its own shares for each KG share, valuing the deal at TWD30 million. KG said that it is also open to offers from market leader Taiwan Cellular (TCC) [TW: 3045], citing its need to find a partner with a 3G licence to ensure continued growth. KG shunned the government’s 3G licence auction in 2002, complaining that the prices were set too high. But now, with Taiwan’s cellular market stagnating – the country has more mobile phones than it does people – operators are looking to high-speed, higher revenue 3G services as a means to boost spending amongst existing customers. Consolidation in the market has long been predicted, with KG – the sector’s smallest player and the only cellco currently operating at a loss (TWD1.19 billion in 2002) – always the most likely to be bought out.