Taiwan's Far EasTone Telecommunications said Thursday that its 2009 agreement to sell a 12 percent stake to China Mobile had been terminated due to the Taiwanese government's restrictions.
Far EasTone Telecommunications and the world's largest mobile phone operator forged the deal worth 17.8 billion Taiwan dollars (529 million US) in April 2009, pending the government's final approval.
But since then little progress has been made with the agreement, nor expectation of any progress before it expires on June 12.
"Since some pre-conditions have not been met, the agreement is now terminated," Far EasTone, the island's third largest telecom subscriber, said in a filing to the Taiwan Stock Exchange.
It was referring to the Taiwanese government's long-standing ban on Chinese companies investing in the country's telecom sector, due to national security considerations.
Although the government opened up swathes of economy to Chinese investors for the first time last year, that easing did not stretch to the telecoms sector.
"Once the ban is lifted (in the future), the two parties can again explore the possibility of the deal," it said, adding that the two companies have agreed to a business cooperation framework agreement.
China and Taiwan agreed in landmark talks in April 2009 to push mainland Chinese investment into Taiwan in an effort to help both sides weather the global financial crisis.
Taiwan enterprises have invested huge sums in China but investment by mainland Chinese firms in the self-ruled island has been restricted.
Ties between China and Taiwan have warmed markedly since 2008 when China-friendly Ma Ying-jeou became the island's president. He was re-elected in January 2012.