TAIPEI: Shareholders of Far EasTone Telecommunications Co have voted their approval of China Mobile's plan to buy a stake in the Taiwan-based company. That means the only hurdle remaining to complete the first investment by a mainland state-owned company in Taiwan is the approval of governments on both sides of the Straits.

Far EasTone shareholders passed the resolution at yesterday's annual meeting of Taiwan's third-largest mobile-phone operator. The resolution authorized the board to sell up to 444 million new shares, worth no more than NT$17.8 billion ($540 million), to Beijing-based China Mobile, the world's largest wireless company based on the number of subscribers. China Mobile and Far EasTone announced the deal, equivalent to 12 percent of the Taipei-based company's enlarged share issuance, on April 29, the day Beijing announced it would allow mainland companies to invest in Taiwan. The acquisition tests Taiwan's commitment to relaxing curbs after the policy shift sparked the largest single-day gain in the island's Taiex benchmark stock index since 1991.

"The key hurdles in this transaction are far more political than they are shareholder," said Tim Smart, an analyst at Macquarie Group Ltd in Hong Kong before the meeting. He rates both companies as "neutral". "The ramifications of this are far more symbolic and political than they are specific for the telecoms industry," he said.

Both companies have said they will seek regulatory approval from their respective governments after Far EasTone shareholders approve the deal.

'Right direction'

"We're asking shareholders to approve China Mobile investing in us because this strategic cooperation is the right direction for the company," Far EasTone chairman Douglas Hsu, 66, said before the motion was adopted.

Hsu's Far Eastern Group owns about 45 percent of Far EasTone, while NTT DoCoMo Inc and Singapore Telecommunications Ltd hold about 4 percent each, said Alison Kao, a spokeswoman for Far EasTone in Taipei.

The sale is expected to be priced at NT$40 per share, according to the resolution passed yesterday, 15 percent higher than Far EasTone's NT$34.70 closing price in Taipei on April 28 before the deal was announced. The shares fell 0.5 percent to NT$38.60 at the close of trade in Taipei, while the Taiex lost 0.1 percent.

Taiwan will publish regulations for industries that it will open up to mainland investment as part of a policy by Taiwan leader Ma Ying-jeou to ease restrictions on trade and economic ties with the mainland. The regulations are to be released later this month.

Telecom sector remains off limits

Telecommunications isn't on the list of industries Taipei intends to open to mainland investment, Lai Shin-yuan, chairwoman of Taiwan's Mainland Affairs Council, which governs mainland policy, said May 20.

Far EasTone's Hsu said yesterday he expects authorities across the Straits to approve the deal by the end of this year. China Mobile vice president Liu Aili said June 3 he is "confident" the deal will proceed and that his company isn't interested in taking control of the Taiwanese carrier.

The share purchase, which will allow China Mobile to take one seat on Far EasTone's board, must be completed within a year, according to the shareholder resolution. The money will be used for mergers and acquisitions, with the funds expected to be spent within three years, the resolution says.

Bloomberg

(HK Edition 06/17/2009 page2)