Pacific Cellular Corporation applies for approval to combine with TransAsia Telecommunications Inc. and T&M Investment Co., Ltd. under Article 11 of the Fair Trade Law
Case:
Pacific Cellular Corporation applies for approval to combine with TransAsia Telecommunications Inc. and T&M Investment Co., Ltd. under Article 11 of the Fair Trade Law
Key Words:
cellular phones, Pacific Cellular Corporation
Reference:
Fair Trade Commission Decision of June 14, 2001 (the 501st Commissioners' Meeting); Decision (90) Kung Chieh Tzu No.568
Industry:
Telecommunications (6000)
Relevant Laws:
Summary:
1. On 8 May 2001, the shareholders of Pacific Cellular Corporation, TransAsia Telecommunications Inc., and T&M Investment Co., Ltd. entered into a "Share Purchase Agreement". This agreement provides for the purchase by Pacific Cellular Corporation of 334,688,510 TransAsia shares from TransAsia shareholders for NT$39.9 per share. This amounts to 97% of the total shares of TransAsia. Pursuant to this agreement, Pacific Cellular also purchased 1,000,000 issued shares of T&M Investment from T&M Investment shareholders. Pacific Cellular then filed an application for approval to combine with TransAsia and T&M Investment under Articles 11(1)(ii) and 11(1)(iii) of the Fair Trade Law (FTL). 2. This acquisition constituted a combination as defined in Article 6(1)(ii) of the FTL, and the Fair Trade Commission granted approval for the said merger as summarized above under Article 12 of the FTL. 3. Reasons for granting the approval are as follows: (1) Pacific Cellular and TransAsia Telecommunications are both operators of cellular phone businesses holding Type 1 Telecommunication licenses. The former holds a license for island-wide operations while the latter holds a license to operate only in a specific region. Therefore TransAsia is able to provide cellular phone services around the island only by forming strategic alliances with other cellular phone services providers. After the merger, TranAsia will retain its independent juristic personality, and Pacific Cellular will assist TransAsia to expand the range of cellular phone services, thus eliminate TransAsia's license limitations. This will increase the options available to consumers and promote competitiveness in the market. Furthermore, because of the increase in the number of consumers in the telecommunications market and the integration of the operators in the industry, the merger will strengthen the converge merging enterprises' economic power; provide a wider range of quality services to Chinese Taipei's cellular phone users through exchange of management expertise and human resources between the merging enterprises, increase overall efficiency and productivity of the market, and reduce overhead. The combination will make a positive contribution to the development of the telecommunications services industry. (2) Because cellular phone services market is very competitive, telecommunications fee control mechanisms and market mechanisms operate in a complementary way, and consumers may freely choose from a wide variety of services from the providers. Also, 1900 megahertz digital low power cellular phones will soon be introduced into the market to provide services to consumers, and 3G licenses will soon be available in 2001, so it is foreseeable that different telecommunication products will become more readily interchangeable, thus further invigorating the market. Therefore, absent any other changes to the status quo, any increase in the enterprises' control over the market due to the merger will be limited, the competition in the market will not be markedly changed, and the risk of restraints on competition is minimal. In addition, the merger will increase the competitiveness of the merging enterprises and will promote the overall quality of the Chinese Taipei's telecommunication services, and should furthe r promote benign competition among telecommunication services providers. (3) According to the statistics on cellular phone users as of March 2001, Pacific Cellular has a 28.2% of the market share, while TransAsia has 2.8%. Although the merger will slightly increase the market share of the enterprises, it will neither give them any financial or technical dominance in the market, nor should it have a direct impact on the concentration rate and composition of relevant markets. Furthermore, because Pacific Cellular has been publicly classified as a market leader by the Ministry of Transportation and Communications, any changes to the service charges of Pacific Cellular require prior approval from the Ministry. Therefore, although the merger may increase the merging enterprises' competitive edge in terms of the number of subscribers and volume of revenue, Pacific Cellular is restricted from directly increasing its service charges to consumers by statutory rate caps and by the prior-approval requirement for rate adjustment. The merger thus will not subject consumers to an unreas onable increase in service charges, nor will it increase the barriers for other enterprises to enter relevant markets. (4) Given the trend for telecommunication services providers to cooperate and integrate with one another, the existing market leaders may not always be able to maintain their superiority in subsequent rounds of competition when new technology is introduced. By introducing foreign technical support, the merger may increase the quality of local cellular phone services providers, invigorate constructive competition in the market, and create a positive impact on the telecommunication industry. Furthermore, as the information technology advances dramatically, multi-faceted value-added products will gradually be introduced. As Pacific Cellular and TransAsia have respective competitive edges in the industry, the merger will enhance the exchange of technology and maximize the productivity and efficiency of the wireless broadband, providing consumers greater variety and higher quality of services. (5) Pacific Cellular and T&M have different business scopes, and are neither competitors nor upstream/downstream enterprises of each other. In addition, T&M is merely a holding company. Pacific Cellular's merger with T&M is purely for purposes of obtaining shares of TransAsia. Therefore the merger will have little effect on the overall economy besides the effect to the merging enterprises themselves. (6) Based on the foregoing analysis, the merger will have limited impact on the competition in the telecommunication industry at the current stage, nor will it create restraints on competition in relevant markets. The act of merger will facilitate technological and industrial competitiveness, and provide diversified and high-quality services to telecommunications users. Given these positive implications for the market, the merger was approved pursuant to Article 12 of the FTL. Appendix: Pacific Cellular Corporation's Uniform Invoice Number: 97176270 TransAsia Telecommunications Inc.'s Uniform Invoice Number: 16086398 T&M Investment Co., Ltd.'s Uniform Invoice Number: 16792767 Summarized by Lu, Li-Na; Supervised by Lee, Wen-Hsiu