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The planned privatisation of Chunghwa Telecom, Taiwan's largest phone company, has received a boost with the island's Council of Grand Justices rejecting a constitutional challenge to a planned overseas share sale.

?Unless there is a major unfavourable turn in market conditions, we will launch the sale once we receive regulatory approval in the US,? said a company official.

The Ministry of Transportation and Communications, Chunghwa's controlling shareholder, plans to sell up to 17 per cent in the company through an offering of American Depositary Shares. Chunghwa registered the ADR offering with the SEC on July 7, and approval is expected within days.

On Friday Chunghwa asked to increase the size of the proposed sale to as much as US$3.61bn from US$2.8bn.

Because the divestment would lower the government's ownership to below 50 per cent and thus make the telecom operator technically a privately-owned company, it has met with fierce resistance from labour unions and the parliament.

A group of 100 mostly opposition legislators filed a complaint to the Council of Grand Justices last month demanding the constitutional court halt the overseas share offering and declare it unconstitutional.

The legislators and Chunghwa's union have also teamed with US labour groups to demand that the SEC withhold approval of the sale, arguing the constitutional complaint presented a risk to US investors.

However, the Council of Grand Justices rejected the complaint late on Friday, saying only the parliament as a whole could demand an interpretation of whether the cabinet had violated its constitutional powers versus the legislature.

Because parliament is in summer recess, a renewed motion by the whole legislature is unlikely in the short term. The company would try to use this ?window of opportunity? created by the court to finalise the share sale, a Chunghwa legal advisers said.

This meant the sale could go ahead within the next 10 days to make it as attractive as possible to investors. Chunghwa Telecom goes ex-dividend on August 11 a date postponed from July in order to accommodate the sale. Chunghwa is to pay T$4.70 (US$14.7 US cents) a share on its 2004 earnings.

?In this industry, yield has already become a key factor for investors,? said Kieran Calder, a telecoms analyst at CLSA in Tokyo.

Sources close to the company added that if the ex-dividend date were missed the company might feel forced to delay the sale.

Copyright The Financial Times Limited 2017. All rights reserved.
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