TCC takes telecoms stake

TCC Hong Kong Cement Holdings, the locally listed flagship of Taiwan's Koo family, has raised $829.5 million to finance its purchase of a stake in KG Telecommunications.

Yesterday's injection of part of KG Telecom into TCC HK Cement is viewed not only as transforming TCC into a telecoms play but has also raised questions of whether the family will shift more assets overseas.

TCC Cement is proposing to buy 10 per cent, the maximum foreign companies can hold in Taiwanese telecoms companies, for $1.5 billion.

That would value the non-listed firm, the smallest of Taiwan's four mobile operators, at about $15 billion, or about $8,500 per subscriber, much lower than the roughly $21,000 which NTT DoCoMo paid for its 19 per cent stake in Hutchison Telecom last month.

It is believed that loss-making KG Telecom has about 1.75 million subscribers with average monthly revenue per subscriber of just NT$400 (about HK$100.84), the lowest among the four operators.

To finance the purchase, TCC HK Cement appointed BNP Prime Peregrine Securities and SG Securities to place 237 million of its old shares, or about 50 per cent of its issued capital.

The shares, owned by parent Taiwan Cement, were placed at $3.50, a discount of almost 8 per cent to yesterday's closing price of $3.80.

In the second stage of the deal, the parent will use the proceeds to subscribe to 305 million new shares in TCC HK Cement, causing its stake to drop from 72 per cent to 52.68 per cent of the enlarged share capital.

The placement is believed to have attracted a strong response.

Sources at BNP Prime Peregrine suggested the deal was at least six times oversubscribed.

It is also believed that TCC HK Cement's name will be changed to TCC International to reflect the restructuring process.

KG Telecom, which is more than 40 per cent owned by the Koo Group, has other strategic partners such as Cathay Insurance, Bell Canada and Thai-owned CP Pokphand.

One analyst suggested that the Koo Group's strategy was focused increasingly on shifting business from Taiwan.

PLACEMENTS