Telco buys cable-TV operator

       Taiwan Mobile Co, the country's second-largest phone carrier, agreed yesterday to buy cable television operator Kbro Co from Carlyle Group for NT$32.8 billion (US$1 billion) in stock and cash to become the market leader.
       "Carlyle will get 589 million shares in Taiwan Mobile and NT$440 million cash," Harvey Chang, president of the Taipei-based operator, said.
       "Carlyle will own 15.5% of Taiwan Mobile, making it the second-largest shareholder," the two companies said in separate statements.
       Chang seeks to use Taiwan Mobiles cable television business, its fastestgrowing division, to boost revenue from so-called convergence services that combine phone, Internet and television. The transaction will raise its share of the cable television market from 6.6% to 32%, with almost 1.6 million customers,making it the industry's largest provider.
       "The deal makes strategic sense as it gives them better economies of scale,"said Vivek Couto, executive director of Hong Kong-based Media Partners Asia Ltd."The growth in cable TV will come from the switch to digital TV and broadband Internet, where they can boost revenue per user."
       Couto estimated the combined company would surpass China Network Systems Inc, controlled by MBK Partners Ltd, and Taiwan Broadband Communications, owned by Macquarie Media Group, by number of subscribers.
       "The transaction is based on a mutually agreed price of NT$55 apiece for Taiwan Mobile stock," the carrier's spokeswoman Rosie Yu told Bloomberg News, without providing further details.
       Revenue at Taiwan Mobiles cable TV and broadband Internet division climbed 22% in the second quarter from a year earlier to NT$1.34 billion, the only one of its three operating divisions to record sales growth, according to a company presentation.
       Consolidated revenue for the company dropped 1% to NT$17.4 billion during the period, according to the presentation.
       "The most significant part of this transaction on the long-term business implication is we have acquired direct access to more than a million households in the urban areas," Chang said."That will provide us with a very substantial platform to provide the convergence services."
       Carlyle, the Washington-based private equity firm, bought a majority stake in Kbro in 2006.
       The cash payment would be made from Taiwan Mobiles existing holdings while the company may seek to refinance approximately NT$24 billion in debt it will assume as part of the transaction,spokeswoman Josephine Juan told Bloomberg News.
       "The shares will be issued out of Taiwan Mobiles existing treasury shareholding," she said.
       "Taiwan Mobile may sell corporate bonds or sign a syndicated loan as it looks to reduce the interest burden on the debt it will assume," Juan said.
       "Taiwan Mobile expects to close the deal within nine months after getting shareholder and regulatory approval,"she said.