Hon Hai in talks to buy 22 percent of Asia Pacific Telecom: report

TAIPEI Sun May 4, 2014 11:40pm EDT

A motorcyclist rides past the entrance of the headquarters of Hon Hai, which is also known by its trading name Foxconn, in Tucheng, New Taipei city, December 24, 2013. REUTERS/Pichi Chuang

A motorcyclist rides past the entrance of the headquarters of Hon Hai, which is also known by its trading name Foxconn, in Tucheng, New Taipei city, December 24, 2013.

Credit: Reuters/Pichi Chuang

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TAIPEI (Reuters) - Hon Hai Precision Industry Co Ltd, which makes iPhones for Apple Inc, is in talks to buy 22 percent of compatriot mobile network provider Asia Pacific Telecom Co Ltd, local media reported citing unidentified sources.

The deal will be worth T$11 billion to T$14 billion ($464.48 million) and represent all Asia Pacific Telecom stock held by government-owned enterprises, the Commercial Times reported on Monday.

Any purchase would come after both Hon Hai and Asia Pacific Telecom won licenses to provide fourth-generation mobile communications services (4G) on a network widely expected to come online on this year.

Hon Hai, the world's largest contract manufacturer of electronic goods, bid for 4G licenses after the chairman said he wanted Hon Hai to diversify from pure manufacturing as sales of wide-margin smartphones such as the iPhone slow worldwide.

The smartphone market is likely to grow 19 percent this year from 39 percent in 2013, showed data from researcher IDC.

On buying into Asia Pacific Telecom, which has a market value of T$49.88 billion, Hon Hai would gain access to 2.1 million subscribers and 3,000 wireless base stations, the Commercial Times reported.

Still, any deal would not be a game-changer for Hon Hai, said Yuanta Securities analyst Vincent Chen.

"Asia Pacific Telecom's profitability is only okay, not great," Chen said. "The deal could help Hon Hai get those 4G base stations, but I'm pretty sure they'd try to drive a hard bargain."

A spokesman for Hon Hai said the company was open to all forms of cooperation and hoped to offer 4G services as soon as possible. He declined to comment on the Asia Pacific Telecom report. Asia Pacific Telecom also declined to comment.

Shares of Hon Hai were 0.1 percent higher in morning trade on Monday whereas those of Asia Pacific Telecom gained 5.3 percent. The benchmark Taiwan SE Weighted Index was down 0.1 percent.

($1 = 30.1410 Taiwan Dollars)

(Editing by Christopher Cushing)

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