China Mobile has called off a plan to acquire a 12% stake in Taiwanese operator Far EasTone, with the deal scuttled by restrictions on mainland investments in Taiwan's telecom sector.
In a regulatory filing, China Mobile announced that the agreement to purchase 444.3 million FarEasTone shares had been terminated because “some of the conditions precedent [to the deal] have not been satisfied.”
The operator was referring to Taiwanese rules restricting Chinese companies from investing in tier 1 telecom operators.
If and when these restrictions are lifted, the operators will consider reviving the deal, China Mobile said.
In the interim, the two companies have signed a framework agreement to “jointly explore opportunities to continue broad-based cooperation in a number of areas in mobile telecommunications businesses in the future.”
The share purchase deal was first announced in April 2009, after the Taiwanese government introduced new laws allowing Chinese companies to invest directly in Taiwan.
At the time, China Mobile had arranged to pay TW$17.77 billion ($594.7 million) for the 12% stake.
But the easing of restrictions has still not been extended to the telecom sector, and Taiwan's Investment Commission has indicated it is not considering opening tier 1 operators to Chinese investment due to security concerns.