National Communications Commission (NCC) announced its decision today (Jan.18, 2023) to approve, along with auxiliary terms, the application of Taiwan Mobile Co., Ltd. (Taiwan Mobile), to merge with Taiwan Star Telecom Co., Ltd. (TSTAR) －Taiwan Mobile being the surviving enterprise; and Far Eastone Telecommunications CO., Ltd. (FETnet), to merge with Asia Pacific Telecom Co. Ltd. (APT) － FETnet being the surviving enterprise.
Due to the rapid development of the telecommunications industry and technology, as well as the high-technology and high-capital characteristics of telecommunications, the deployment of communications network requires enormous investment. Moreover, due to the increased network deployment costs of 5G technology, the demand for capital of telecommunication enterprises worldwide is greater than ever. Consequently, international telecom enterprises may opt to cooperate or merge to integrate spectrum and network resources, improve operations or increase network coverage in order to achieve the synergy effect of network economies of scale. Likewise, consolidation among domestic telecommunications enterprises follows a similar trend. In response, in accordance with Article 26 of the Telecommunications Management Act (the Act), NCC has assessed two merger applications under the consideration of reasonable allocation of resources, industry development, subscribers’ rights and interests, market competition and national security and has decided to approve the two merger applications with auxiliary terms.
NCC pointed out that, upon approval of the two merger applications with auxiliary terms, the two surviving enterprises would integrate the spectrum, network and manpower resources to attain the following objectives:
- Increase the radio wave coverage and further provide more perceptible service quality: 4G/5G radio wave coverage shall increase to 99%/98% by 2027. After the two surviving enterprises consolidate network services, TSTAR and APT subscribers shall be provided services by Taiwan Mobile and FETnet respectively. Subscribers of the two dissolved enterprises will benefit from better network coverage and enhanced service quality.
- Increase deployable bandwidth and continue to invest in the network infrastructure to optimize service quality: Billions of New Taiwan Dollars shall be invested in network infrastructure by 2027. The two surviving enterprises will obtain the bandwidth possessed by the two dissolved enterprises, respectively; and, due to the increase in spectrum resources, will be enabled to establish more effective and flexible network service plans and to further increase service quality.
- Protect the rights and interests of the existing 4,760,000 subscribers specified in the contract: The surviving enterprises shall bear the dissolved enterprises' liabilities arising from subscriber contracts and provide non-discriminatory services without detrimentally affecting the rights and interests of existing subscribers. The surviving enterprises shall also be requested to continuously provide multiple tariff plans.
- Ensure rights and interests of subscribers’ and minority groups: NCC has requested surviving enterprises to ensure that various tariff plans be provided to different types of subscribers, particularly those of the groups of physically/mentally challenged people, low and mid-to-low income households, disadvantaged students and the elderly above 65 years old.
- Expand the construction of base stations in remote areas to reduce the digital divide: Proactively establish base stations in remote areas in order to increase digital accessibility and to further bridge the digital divide along with the promotion of education and learning activities.
- Enhance promotion of the wholesale market to provide opportunities to new enterprises: Create various niche markets through promotion and multiple pricing models, helping attract new enterprises to enter the market and to further activate and enhance market competition.
- Upgrade telecommunications technology and accelerate industrial transformation: Use frequency bands with mature technology to provide private network services to enterprises; popularize and accelerate 5G vertical applications; and facilitate industrial transformation.
- Save energy and reduce carbon emissions to achieve ESG goals: Following the merger, the network deployment will be optimized and, together with the adoption of the smart energy-saving system, aim to save approximately 160 million kWh each year, equivalent to the carbon reduction effect of 205 Daan Forest Parks.
- Fulfill corporate social responsibility and promote digital inclusion plans: In order fulfill corporate social responsibility, the surviving enterprises will, together with their respective business cores, promote various digital inclusion plans. The two enterprises are expected to invest NTD3.2 billion in caring for minority groups, charity donations, telemedicine, digital nursery and so on by 2027.
Regarding concerns of excessive spectrum, based on the inspection undertaken by the Ministry of Digital Affairs (MODA), NCC explains that the two merger applications have both exceeded the upper limit prescribed in Paragraph 1 of Article 12 of the Regulations Governing the Use of Radio Frequencies. Nevertheless, considering reasonable allocation of resources, promotion of market competition, subscribers’ rights and interests and demand for network consolidation, NCC and MODA jointly determined to request the surviving enterprises to resolve the issue of excessive spectrum by adopting any of the following methods and obtain approval from MODA before June 30, 2024:
(1) Return excessive bandwidth of their own accord; (2) transfer excessive bandwidth to other telecom enterprises that are not a subsidiary, affiliate or partner of the surviving enterprises; and (3) exchange excessive bandwidth with other telecom enterprises that are not a subsidiary, affiliate or partner of the surviving enterprises. Those that fail to make the aforesaid corrections within the prescribed period and violate Paragraph 2 of Article 52 of the Telecommunications Management Act by using a radio frequency that is not allocated by the competent authority (MODA) shall be fined not less than NTD 500,000 and not more than NTD 5 million and shall be notified that the use of such spectrum be thereby suspended in accordance with Paragraph 3 of Article 74 of the Act.
NCC emphasized that the said mergers could have a significant influence on the development of the ICT industry as it is relevant to the overall development of the ICT industry, fair competition, and the protection of consumers’ rights and interests. Consequently, with the aim of compiling public feedback and ensure that the most appropriate decision be made, NCC held hearings on September 29 and 30, 2022 in accordance with Article 55 of the Administrative Procedure Act and NCC’s Regulations Governing the Holding of Hearings. Furthermore, NCC requested the applicants for the mergers of Taiwan Mobile with TSTAR, and FETnet with APT, as well as a third-party enterprise, Chunghwa Telecom Co., Ltd, to present their opinions on November 23 and 30, 2022 in accordance with Article 39 of the Administrative Procedure Act. Furthermore, based on government agencies’ unitary executive principles and in response to reported disputes arising from the upper limit of spectrum, NCC invited MODA to discuss the radio frequency use management issues on December 19, 2022; and January 9 and 13, 2023. As for industrial development and market competition factors involved in the two merger applications, NCC also invited the Fair Trade Commission, known as the competent authority in regard thereto, to exchange opinions. After assessing the opinions provided by all circles and its own investigation, NCC have evaluated the two merger applications based on the aforesaid review factors.
As the trend of greater cooperation among industry players continues, both among domestic and foreign telecommunications enterprises, NCC believes that any major change to any telecommunications market will have a deep impact on worldwide industries and terminal subscribers. As a result, NCC hopes that the approval of the two merger applications can be a positive influence on domestic telecommunications industry and even on the country’s macroeconomics, enabling Taiwan to map the best path forward, continuously enhance our digital infrastructure and bridge the digital divide. In the future, NCC will proactively assess the surviving enterprises’ network integration and infrastructure construction progress; and aim to facilitate the overall development of the industry in order to generate the greatest benefit for all.