Application for approval of combination filed by KG Telecom and Tuntex Telecom in accordance with Article 11 of the Fair Trade Law

Chinese Taipei


Case:

Application for approval of combination filed by KG Telecom and Tuntex Telecom in accordance with Article 11 of the Fair Trade Law

Key Word:

mobile phone, approval for combination

Reference:

Fair Trade Commission Decision of April 21, 1999 (the 389th Commission Meeting)

Industry:

Telecommunications Industry (6320)

Relevant Law:

Article 6(ii) and 24 of the Fair Trade Law

Summary:

  1. KG Telecom acquired 327,500,000 of Tuntex Telecom's shares, which accounted for 81.88% of the total shares issued by Tuntex Telecom. It falls within the definition of merger under Article 6(ii) of the Fair Trade Law (FTL). Because the turnover for KG Telecom during the preceding year already reached NT$2 billion, KG Telecom was required to file an application for approval of the merger in accordance with Article 11(3) of the FTL.

  2. The parties to the merger under review were both Type I Telecommunications Enterprises engaged in the operation of mobile telephone business. KG Telecom had a concession license for the DCS1800 system in the northern region while Tuntex Telecom had a concession license for the DCS1800 system in the central and southern regions.

    Although currently the operation regions for single-region mobile phone operators in domestic market are constrained, they could still offer convenient, full-area coverage services to their customers by signing "roaming agreements" with other single-region operators. In addition, mobile phone subscribers can choose to subscribe from either single or full-region operators; the services provided by both are mutually substitutable. Therefore, the relevant market for this case should be determined as "island-wide market."

  3. According to the statistics compiled by the Directorate General of Telecommunications (DGT), there are currently seven domestic mobile phone operators. The three full-region operators, including Chunghwa Telecom, jointly have a 80% market share. KG Telecom's market share approximates 8% and ranks fourth among the seven operators. Tuntex Telecom holds only a 3% market share. After the merger between KG Telecom and Tuntex Telecom, their combined market share would be about 11%, and would still rank fourth among the current seven operators. Since there would be no significant changes in the ratio of market concentration, the merger will not lead to restrictions in competition. On the other hand, the merger will improve the operational efficiency of both KG Telecom and Tuntex Telecom, allowing them to provide directly the full-region services. The result will not only enhance the competition in the mobile phone industry, but will also benefit the overall economy. Thus, the merger is approved pursuant to Article 12 of the FTL.

Summarized by Liao, Hsien-chou

Supervised by Hsin, Chih-chung

Appendix:

KG Telecom's Uniform Invoice Number: 16085840

Tuntex Telecom's Uniform Invoice Number: 16081598


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