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Last updated: July 7, 2005 4:05 pm

Chunghwa to proceed with offering

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Chunghwa Telecom is to start marketing its overseas share offering, which could raise as much as US$2.8bn, despite failing to reach an agreement with its labour union over staff benefits in the case of privatisation.

Taiwan's largest telecoms services provider on Wednesday registered with the US Securities and Exchange Commission to sell shares held by the Ministry of Transportation and Communications in the form of American Depository Receipts. The size of the offering is equivalent to 1.29bn common shares, or 13.4 per cent of the company. Pricing will be determined after the roadshow, which begins next week. But the state-controlled former monopoly could see its planned share sale, one of Taiwan's largest-ever secondary offerings, disrupted by its labour union.

Union chairman Chang Hsu-chung on Thursday reacted with anger to the SEC filing. The latest round of talks with the government and management on Wednesday afternoon had not brought an agreement on employment benefits, he told the Financial Times.

He said the union would consider calling a strike once Hochen Tan, Chunghwa's chairman, left the country for the roadshow. He also repeated threats that the union could derail the offering by driving down Chunghwa's share price with large protests and legal action against shareholders.

Once the government's holdings in Chunghwa fall below 50 per cent, the company will be considered privatised under Taiwanese law, depriving its employees of civil servant status. They would also lose claims to a preferential retirement annuity scheme.

The union is demanding compensation from Chunghwa, a proposal that analysts say would add a considerable financial burden to the company.

The SEC filing stated the ADR issue would bring the government's ownership in Chunghwa down to about 52 per cent. The company's shareholders have also approved the sale of a further 17 per cent stake held by the government.

Sources close to the company said a compromise could be reached by scaling down the ADR offering in order to avoid the privatisation issue at this stage.

But if the union implements its threat of protests, the company is likely to delay the share sale. Chunghwa's initial public offering in Taiwan was delayed for almost three years after its roadshow in 2000 over arguments with the union and protests from the opposition party. Taipei is eager to sell its stake as early as possible, as other global telecoms share offerings would mean competing for investors later this year.

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