TOT Plc has indefinitely suspended its plan to set up an infrastructure fund for its underground pipe assets, as it was disqualified due to current regulations.
According to a TOT executive who asked not to be named, TOT had originally planned to set up the fund to finance its long-term business expansion.
TOT appointed Bualuang Securities last year as its financial adviser to set up the fund, which it expected to list on the Stock Exchange of Thailand (SET) by year-end to be valid for 10-15 years.
TOT has a 25,000km network of underground pipes or "conduits".
It rents the pipes to more than 10 telecom companies, which use them to lay their cables.
TOT charges those companies a monthly fee of 20,000 baht per km.
The company had originally planned to transfer the usage rights for the pipes to the fund, whose shares would have been available to general investors via the SET.
If the fund could list on the SET, TOT would be able to generate a large amount of money through share offerings, which the company intended to use to expand its underground pipe network.
But the source said the present business contracts with the telecom companies who have rented TOT's pipes do not conform with the infrastructure fund's conditions, as most of them are annual contracts.
"The existing yearly contracts are an obstacle to establishing an infrastructure fund because general investors need to see sustainable revenue through the terms of the fund, which are normally based on periods of 10-15 years," the source said.
TOT has been negotiating with the 10 telecom companies to review the present contracts by extending the term from one year to at least 10.
Those negotiations have yet to conclude, forcing TOT to indefinitely suspend its infrastructure fund plan.
According to the original scheme, TOT would not transfer its assets to the fund, but only the usage rights for them.
"This was to avoid criticism that TOT would allow private sector players to control those assets," the source said.
In line with infrastructure fund regulations, one party cannot hold more than a 33% stake in any fund.
TOT earns 450 million baht a year from its underground pipe rental service.
The company now operates under a business plan assigned by the State Enterprise Policy Commission or superboard.
Last year, TOT booked total revenue of 30.8 billion baht and 1.6 billion in EBITA (earnings before interest, tax and amortisation).
But the company booked a 5.8-billion-baht net loss on massive amortisation of its assets.