A triple dividend deal

A triple dividend deal

If Gulf Energy Development acquired InTouch Holdings, it would be a boon to the government, its largest shareholder Singtel, and the firm's bottom line

Satellite dishes are positioned behind Thaicom's headquarters in Nonthaburi province. Tawatchai Kemgumnerd
Satellite dishes are positioned behind Thaicom's headquarters in Nonthaburi province. Tawatchai Kemgumnerd

SET-listed Gulf Energy Development's determination to acquire InTouch Holdings could prove favourable for three parties -- the government, Gulf, and InTouch's biggest shareholder Singtel -- say industry pundits.

The planned purchase was believed to have been supported by the government, which wanted a clearer picture of InTouch's shareholding structure because it is the parent company of SET-listed satellite service provider Thaicom, which runs the service under a concession from the Digital Economy and Society (DES) Ministry, said the pundits.

Thaicom's concession contract is set to expire in September this year and its major related assets are due to be handed over to the DES Ministry.

The ministry has assigned CAT Telecom to handle Thaicom's 4 and 6 satellite after the concession ends but that responsibility currently belongs to National Telecom (NT), which was formed through the merger of CAT and TOT in January this year.

It is expected NT will hire or work with Thaicom to continue operating the satellite services.

POLITICAL PUSH

"The deal is more than just business as there is also a political push behind it since it relates to national security," said a telecom veteran who requested anonymity.

Shortly before Gulf announced its intention to purchase InTouch on April 19, DES minister Chaiwut Thanakhamanusorn pointed out the ministry will hold talks with the management of InTouch and Thaicom about the latter's shareholding proportion held by foreign entities.

Thaicom's 41% stake is held by InTouch whose major shares are held by foreign entities.

When the satellite concession contract was made in 1991, Shin Corporation, the former name of InTouch, agreed to set up a new firm to run the satellite service with Shin holding a stake of at least 51%. The new firm was named Shinawatra Satellite, which later changed its name to Thaicom.

Under the Thaksin Shinawatra administration, Thaicom in 2003 had requested the Information and Communication Technology (ICT) Ministry -- the former name of DES ministry -- to adjust the concession by enabling InTouch to reduce its stake in Thaicom from at least 51% to 40% as it wanted more partners. This proposal was later approved.

However, the National Anti-Corruption Commission later ruled against the approval but InTouch's stake in Thaicom never returned to the 51% as stipulated in the contract.

As InTouch's share proportion in Thaicom should be at least 51% and with Singapore's Singtel holding a 21% stake in InTouch, efforts must be made to ensure shareholding proportions of foreign entities in Thaicom is not more than Thai entities, the minister said.

The telecom veteran pointed out the buyout push demonstrates "the government's mindset of national security through digital network and satellite business".

The veteran also said Sarath Ratanavadi, Gulf's major shareholder, also has good connections with influential government figures.

He studied in the engineering faculty at Chulalongkorn University where Deputy Prime Minister Supattanapong Punmeechaow was his senior. Mr Chaiwut, a junior faculty member, also once served as an executive at Gulf.

Gulf's chief of asset management, Smith Banomyong, was also once an executive at Siam Commercial Bank just like Mr Supattanapong and ML Chayotid Kridakorn, chairman of NT board.

"The deal would be welcomed by the government in terms of perception," the veteran said.

BENEFITS FOR GULF

An analyst in the telecom sector who requested anonymity said the deal could help Gulf diversify its business portfolio and explore future business opportunities such as electric cars (EVs), autonomous cars, smart energy and smart ports.

Acquiring InTouch will help Gulf become healthier in terms of balance sheet, the analyst noted.

Mr Smith said InTouch is a large firm with a strong financial position and a capitalisation of 40 billion baht, debt of just 8 billion, and D/E ratio of less than 1.

If Gulf can purchase more than 50% of shares, it can file a consolidated financial statement so the D/E ratio of the two companies are combined.

Gulf is ready to apply for a short-term loan from 15 local and foreign financial institutions worth 150 billion baht to fund its acquisition of InTouch Holdings.

"Success of the deal may facilitate Gulf's new business ventures in the future if it creates threats to some state agencies and requires a nod from the government's management," the analyst said.

POSITIVE FOR SINGTEL

The analyst said Gulf is a big player in the energy sector and it could generate business convergence between the energy sector, industrial and digital networks in near future.

The deal would be a boon for market capitalisation of InTouch and its subsidiary Advanced Info Service's shares, which in turn could create a positive note for major shareholders such as Singtel and Temasek, the analyst noted.

Gulf management indicated the tender prices are appealing and it hopes it can collect more than 50% of InTouch's stake, including 18.93% it already owns, while some analysts believe it is unlikely to hold over 30%.

"If the acquisition goes as planned, it will be interesting to watch the balance of power in InTouch's board of directors and their policies in the future." the analyst said.

Do you like the content of this article?
COMMENT (6)