TAIPEI-- Hon Hai Precision Industry Co.'s effort to expand
beyond contract manufacturing has hit a hurdle after regulators
asked that a merger proposal for its two telecom units be
resubmitted.
Taiwan's National Communications Commission on Wednesday asked
Hon Hai's telecom-equipment unit, which is called Ambit, and its
mobile operator, Asia Pacific Telecom, to address legal concerns
over a roaming arrangement the proposed merged entity plans with a
third-party wireless service provider.
"We understand Asia Pacific Telecom has a strategic alliance on
roaming services with a third-party operator. There are legal
concerns with this partnership but the application document doesn't
address that," the NCC said.
"The companies should clarify our concerns when they resubmit
their application, then we will handle the review immediately," the
regulator added.
The NCC declined to elaborate on its legal concerns.
The planned merger of Ambit and Asia Pacific Telecom is part of
Hon Hai's shift away from its bedrock business of assembling
products for Apple Inc. and Xiaomi Inc., a model that renders
profit margins razor thin.
The new single company, in which Hon Hai will be the largest
shareholder, would be a key step in the contract manufacturer's
foray into telecom services. Hon Hai, which is also known as
Foxconn Technology Group, aims to offer speedy fourth-generation
wireless services locally through the merged unit, which will be
called Asia Pacific Telecom.
In September, Taiwan Mobile agreed to be Asia Pacific Telecom's
roaming partner, offering wireless service to Asia Pacific Telecom
outside the newly merged company's coverage areas. Taiwan Mobile
also said it would acquire a minority stake of 3.45% in Asia
Pacific Telecom.
The Taipei Times reported Thursday, citing a NCC official, that
the NCC has been investigating claims by other telecom companies
that Asia Pacific Telecom hasn't built the number of 4G base
stations it promised in the merger application. Instead, the report
said that Asia Pacific Telecom plans to rely on Taiwan Mobile Co.'s
network, even when customers are within Asia Pacific Telecom's
coverage areas.
Asia Pacific Telecom, which speaks also on behalf of Hon Hai and
Ambit, declined to comment on the Taipei Times report Thursday and
said it will resubmit the merger application with supplementary
documents as soon as possible. Taiwan Mobile couldn't be reached
for comment.
Hon Hai's foray into wireless services also ran into a
regulatory obstacle last year. The NCC raised security concerns
about the company's plan to use Huawei Technologies Co.'s gear in
building the new 4G network. Hon Hai eventually dropped such plans
for the application review to proceed.
Write to Aries Poon at aries.poon@wsj.com and Lorraine Luk at
lorraine.luk@wsj.com
Access Investor Kit for Hon Hai Precision Industry Co., Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=TW0002317005
Access Investor Kit for Taiwan Mobile Co. Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=TW0003045001
Access Investor Kit for Asia Pacific Telecom Co., Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=TW0003682001
Access Investor Kit for Apple, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0378331005
Subscribe to WSJ: http://online.wsj.com?mod=djnwires