RPT-UPDATE 1-Taiwan's Far EasTone surges after China Mobile bid

Thu Apr 30, 2009 5:52am EDT

(Repeats to fix formatting) (Adds close, regulator comment)

TAIPEI, April 30 (Reuters) - Shares in Taiwan's third-largest telecom operator Far EasTone (4904.TW) soared to a four-month high on Thursday, after it said it would sell a 12 percent stake to China Mobile (0941.HK) at a 14 percent premium.

Shares of Far EasTone rose by their daily limit up 6.96 percent at T$37.65, their highest intraday level since Jan. 6 this year, but still lower than the T$40.00 China Mobile agreed to pay for it. [ID:nLT876587]

The benchmark TAIEX share index .TWII rose 6.74 percent.

"Far Eastone has always been seen as a dividend yield sort of company until now, but this has changed," said Gary Chia, an analyst at Yuanta Securities.

"It's tapping into a growth market, and the largest one of all to boot, and it seems that there might be some potential for expansion as a result of this tie-up."

A regulator cautioned that the acquisition was technically still not allowed under Taiwan law that prohibits Chinese companies from investing in Taiwan telecommunications companies.

Taiwan is preparing to allow a range of investments by Chinese investors for the first time from next month, as ties with Beijing, a former political rival, thaw under a year-old China-friendly Taiwan adminsitration.

Emile Chang, deputy executive secretary of the investment commission of Taiwan's economics ministry, said telecoms investments were not on the initial list of investments to be allowed. But an analyst said the category could be included on additional lists in the near term if cross-strait ties continued to warm at the same rapid rate.

Investors have been less than bullish on Far EasTone this year, choosing to place their bets on higher-growth industries such as the technology and financial sectors.

Far EasTone shares have remained flat this year, underperforming the benchmark TAIEX .TWII share index's more than 20 percent advance.

Far Eastone competes with bigger rivals Chunghwa Telecom (2412.TW) and Taiwan Mobile (3045.TW) in Taiwan's telcoms sector, one of Asia's most competitive and saturated markets.

(Reporting by Kelvin Soh)