Cayman Islands-incorporated Estar Cable Ltd. applied for approval to combine with 10 domestic enterprises operating cable systems - Prosperity Catv Corp., Everlasting Cable TV Co., Ltd., Li-Guan Cable TV Co., Ltd., Wonderful Cable TV Co., Ltd., Gaho Cable TV Co., Ltd., New Visual Wave Cable TV, Inc., Telefirst Cable Co., Ltd., Sun Crown Cable TV Co., Ltd., Chin Lian Incorporated Ltd., Gang Du Cable TV Co., Ltd.
Case:
Cayman Islands-incorporated Estar Cable Ltd. applied for approval to combine with 10 domestic enterprises operating cable systems - Prosperity Catv Corp., Everlasting Cable TV Co., Ltd., Li-Guan Cable TV Co., Ltd., Wonderful Cable TV Co., Ltd., Gaho Cable TV Co., Ltd., New Visual Wave Cable TV, Inc., Telefirst Cable Co., Ltd., Sun Crown Cable TV Co., Ltd., Chin Lian Incorporated Ltd., Gang Du Cable TV Co., Ltd.
Key Words:
cable TV system operator
Reference:
Fair Trade Commission Decision of June 14, 2001 (the 501st Commissioners' Meeting); Decision (90) Kung Chieh Tzu No. 557~566
Industry:
Television Broadcasting Industry (8620)
Relevant Laws:
Summary:
1. Estar Cable Ltd. was incorporated under the Law of the Cayman Islands in 2000. Anticipating the capital-intensive and technology-intensive nature of the industry's future development and hoping to revamp their enterprises, shareholders in Prosperity Catv Corp. and the nine other domestic enterprises seeking merger decided to release a portion of their share equity to attract financing from specialized foreign institutional investors and technology from major international strategic partners. To achieve the goal of enterprise renovation, an offshore holding company (the applicant enterprise) was formed to coordinate the proposed project and with the intent of acquiring, through direct or indirect means, more than one-third of the total voting shares in each of the 10 domestic cable TV system operators involved, and thus obtaining direct or indirect control on business operation or personnel hiring and dismissal over the 10 enterprises involved. The applicant therefore sought the Fair Trade Commission's approval of its merger application under Articles 6(1)(ii), 6(1)(v), and 11(1)(ii) of the Fair Trade Law (FTL). 2. Findings by the Fair Trade Commission are as follows: (1) Estar Cable Ltd. plans to acquire, through direct or indirect investment, more than one-third of the total voting shares of each of the 10 domestic cable TV system operators in question and thus obtain control on business operation or personnel hiring and dismissal over said enterprises. This would fall within the type of merger defined in Articles 6(1)(ii) and 6(1)(v) of the FTL and should be approved the application under Article 12 of the FTL. (2) Estar's acquisition of [said number of voting shares] in Prosperity Catv Corp. and the nine other cable TV system operators through investment still complies with Article 19(ii) of the Cable Television Broadcasting Law and its relevant regulations. 3. Reasons for granting the approval are as follows: (1) After giving due consideration of the following, the merger was determined to be beneficial to the overall economy: (i) Through the supplement of capital, human and technology resources, the enterprises may strengthen the operating structure of the cable TV operators. The merger application filed by the applicant states that the merger would attract capital from specialized foreign institutional investors and technology from major international strategic partners to strengthen the operating structure of the merging enterprises. (ii) Promoting the advancement of the cable television industry: The merger will help upgrade the cable television industry through provision of integrated services including cable TV channels, telecommunications and Internet access via the same platform. (iii) Reduction of transactional risk of renewing cable TV channel contracts: With the applicant obtaining control on business operation and personnel hiring and dismissal of the merging enterprise, the merged enterprise will be able to grasp a certain number of stable cable TV channel supply sources, reducing transactional costs and stabilizing supply and demand while reducing external costs caused by renewal of channel contracts between upper and lower end suppliers. (iv) Increase the willingness of cable TV channel providers to provide outstanding programming through the use of broadcast undertakings: The merged enterprise will be able to rely on its broadcast undertakings to lessen the investment risk on new cable TV channel programming and encourage channel providers to introduce more high quality programming. (v) Provide comprehensive services for consumers: An infusion of foreign capital will permit the merged enterprise to improve its technical hardware and provide consumers with higher quality, more versatile entertainment, information and telecommunications services. (2) Assessment of restrictions on competition: Considering the market power of the applicant and the shareholders in the merging enterprise with respect to provision of cable TV programming, there are worries that the merger may induce a trend toward market concentration in the cable TV programming market. Further, the merger will clearly give the merging enterprise a competitive edge over other cable TV providers operating in the same area who have not participated in the merger, possibly eroding the competitiveness of system operators not participating in the merger or limiting the possibility for other prospective competitors to enter the market. (3) Overall assessment: Based on the assumption that the merger may create technological innovation; it may reduce the likelihood of market concentration of broadcasting systems over the long term. The advancement of super compression technology and increasing use of Set-Top-Boxes will prompt a substantial increase in the number of channels provided by cable television systems. Given the trend toward integration among 4C industry operators, the merger may prompt further advances in such technology and promote "innovative competition," facilitating cross-industry integration among the cable television, telecommunications and Internet industries. This will reduce drawbacks resulting from restrictions on competition caused by the merger. Further, the operations of relevant enterprises are regulated by the Cable Television Broadcasting Law and Satellite Radio and Television Broadcasting Law. Consumers' complaints regarding price and quality may be handled by the relevant competent authorities, alleviating any possible drawbacks resulting from restrictions on competition caused by this merger. (4) The applicant in this case is a foreign legal person. Applications to invest in the domestic cable television industry by a foreign legal person must be made pursuant to the relevant regulations under the Company Law and the Foreign Investment Law and conform to the relevant requirements under Article 19(ii) of the Cable Television Broadcasting Law. Once the applicant has registered with the R.O.C. Government, it may not violate the above-mentioned provisions of the law. It is therefore necessary to impose an additional obligation on the applicant to register. (5) In summary, the overall economic benefit of the merger of the 10 cable television enterprises outweighs the disadvantages resulted from competition restraint. The application is therefore approved under Article 12 of the Fair Trade Law. Appendix: Prosperity Catv Corp.'s Uniform Invoice Number: 97162515 Everlasting Cable TV Co., Ltd.'s Uniform Invoice Number: 16085813 Li-Guan Cable TV Co., Ltd.'s Uniform Invoice Number: 97173512 Wonderful Cable TV Co.'s Uniform Invoice Number: 97173392 Gaho Cable TV Co.'s Uniform Invoice Number: 97167650 New Visual Wave Cable TV, Inc.'s Uniform Invoice Number: 97166364 Telefirst Cable Co., Ltd.'s Uniform Invoice Number: 97161945 Sun Crown Cable TV Co., Ltd.'s Uniform Invoice Number: 96973683 Chin Lian Incorporated Ltd.'s Uniform Invoice Number: 97164582 Gang Du Cable TV Co., Ltd.'s Uniform Invoice Number: 97178452 Summarized by Yeh, Su-Yen; Supervised by Lee, Wen-Hsiu