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April 17, 2007 2:13 am

Chunghwa plans China alliance

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Chunghwa Telecom, Taiwan’s largest telecommunications company, hopes to enter China through indirect investment in a small local operator and by teaming up with one of the mainland’s fixed-line networks in 3G mobile services, according to its chairman.

State-controlled Chunghwa expects Chinese-language data content to be a major future growth driver. However, Taiwan’s government heavily restricts telecom investment in politically hostile China. Hochen Tan, Chunghwa chairman, told the Financial Times that the telecoms company intends to offer itself as a partner to China Telecom and China Netcom once the two mainland Chinese operators obtain 3G licences. The two networks saw their voice revenue drop last year, and believe the 3G licences could offer an important opportunity for them to regain profitability by adding mobile services to their eroding fixed-line business.

Mr Hochen said in order to chase China Mobile and China Unicom, the mainland’s incumbent mobile operators, the two fixed-network companies would need expertise in the development, pricing and marketing of 3G content.

“Although the Taiwan market is much smaller than China’s, there are similarities in our habits, our language, our stories,” he said.

The plan is at odds with Taiwan government regulations, which does not allow the island’s telecoms operators to invest in the industry in China or offer services there. But Mr Hochen said he had started to lobby the government on relaxing the restrictions.

“It will be a window. Once it closes, there will be no other big good opportunities,” he said.

Separately, Chunghwa plans to take an indirect stake in a small telecoms company. Mr Hochen said Chunghwa is already co-operating with the mainland company, which he declined to name, and plans to set up a third-country holding which could take a stake in the Chinese partner, potentially through another local vehicle.

The plans come as the company has launched an aggressive makeover in the wake of its privatisation in August 2005, including heavy spending on network modernisation and investments in content providers and channel operators.

Chunghwa is also planning to take stakes in telecoms operators in Vietnam, Thailand, Cambodia and Indonesia, Mr Hochen said.

In addition, Chunghwa is considering trying to take on a regional hub role for itself. Mr Hochen said the Christmas earthquake off Taiwan’s Southern coast that cut a host of marine cables and disrupted telecoms services all over Asia had shown Taiwan’s key location at the crossroads of cross-Pacific cables and links from East Asia to South Asia and Europe.

Chunghwa would take a more active role managing regional capacity, he said.

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