True Corporation's almost decade-old quest for a strategic partner is over as it forged an alliance with global telecom giant China Mobile International Ltd (CMI) to support its ambitious regional growth.
Under the agreement, CMI, a wholly owned subsidiary of China Mobile Communication Co, will pay 28.6 billion baht for an 18% stake in Thailand's leading telecommunications conglomerate, backed by billionaire Dhanin Chearavanont.
A partnership contract was signed yesterday in Bangkok.
True will issue 10.077 billion new shares to existing shareholders and CMI at a price of 6.45 baht per share.
Assuming full placement, the share issue will raise 65 billion baht in capital for the company.
CMI will be offered up to 4.429 billion shares for 28.569 billion baht.
Existing shareholders will be offered one new share for every 2.5725 shares held, raising 36.4 billion baht.
True will hold an extraordinary shareholders' meeting to approve the capital increase and rights issue on July 25, with the share register to attend the meeting closed on July 4.
If approved, subscription for the new shares will be held from Aug 22-28, with the share register to subscribe to the offering closed on Aug 5.
Registered capital will increase by about 101 billion baht to 246 billion.
Assuming the offering is fully subscribed, dilution will equal 18% in control and 4% in price, True said in a statement to the Stock Exchange of Thailand.
Approval of at least three-fourths of shareholders is required for the deal to proceed.
True chief financial officer Noppadol Dej-Udom said company parent Charoen Pokphand Group would purchase any unsubscribed shares to ensure True received 65 billion baht.
The partnership represents a milestone in True's initiative to become a regional telecom player and "blue-chip stock", he said.
"We plan to use the proceeds from the sale to repay our bank loans of 52 billion baht in full," Mr Noppadol said, adding that the remaining 13 billion would be reserved for the auction of the 1800-megahertz spectrum in August to provide fourth-generation (4G) mobile service.
After the repayment, True's debt will dip to some 40 billion baht.
"Our interest costs will be cut by 4 billion baht a year," Mr Noppadol said.
"As the world's largest mobile communications company, with a subscriber base of 800 million, CMI represents an important strategic partner, and we view this deal as the start of a productive collaboration between our two companies in support of handsets, international roaming, digital content, applications and e-commerce."
Marc Einstein, an industry principal in digital media and mobile telecommunications at Frost & Sullivan, said the partnership seemed to be perfectly timed for the Chinese firm to own a stake in True while there was no competition.
"It's a risk for China Mobile investing in a major telecom operator abroad. But now is a good time," he said.
True is the only independent mobile operator in Thailand and has been seeking foreign partnership for years to help fund its network expansion. 4G technology is on the doorstep, and True hopes China Mobile will pitch in with funding.
"This is exciting news for Chinese vendors, because now True will do more network equipment business with China," said Mr Einstein.
Teera Kanokkanjanarat, senior ICT analyst at Frost & Sullivan in Thailand, said the expansion of True and CMI into the digital mobile market would strengthen both their positions. The partnership gives CMI a global presence, while Thailand serves as a solid base for Asean market penetration in telecommunications and other businesses.
CMI is being advised by China International Capital Corporation, while Deutsche Bank is advising True.
TRUE shares closed yesterday on the SET at 7.45 baht, up 20 satang, in heavy trade worth 1.36 billion.
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Writer: Srisamorn Phoosuphanusorn & Suchit Leesa-nguansuk