The Charoen Pokphand Group (CP Group) and Telenor of Norway are exploring a merger of their telecom units in Thailand that could form a new mobile market leader in the country.
A deal, if completed, would merge the telecom operations of SET-listed Total Access Communication (DTAC) and CP Group’s True Corp (True), Oslo-based Telenor said in a statement.
DTAC is currently valued at around $3 billion, according to Refinitiv Eikon data, while True has a value of $4.5 billion.
CP Group did not immediately respond to a request for comment.
It would be the Norwegian firm’s second tie-up in Southeast Asia this year, following a June deal with Axiata Group Bhd to merge mobile operations in Malaysia in a $15-billion transaction, creating a new market leader there.
Mobile operators are facing pressure on profits in a challenging industry environment and mounting investment costs as new technologies such as 5G emerge.
“There are open issues outstanding and there is no certainty that the discussions will result in a final agreement. Telenor will not provide any further comments at this stage of the process,” the Norwegian company said.
Telenor serves 172 million customers with roughly half its revenue generated in Asia and half in the Nordic region. DTAC is ranked third in the Thai market behind first-place Advanced Info Service (AIS) and True Move.
A deal, if approved by regulators, would give the combined entity a market share in Thailand of around 54%, surpassing AIS. True has a total mobile subscriber base of 32 million while DTAC has 19.3 million. AIS has 43.7 million.
True did not deny the report.
Chief financial officer Yupa Leewongcharoen told the Stock Exchange of Thailand (SET) that that if there was any clarification required to be reported to the regulator, the company would inform the SET accordingly.
When reached by the Bangkok Post, a highly placed source at True did not comment on the report.
DTAC refused to comment on the issue when reached by the Bangkok Post, saying there would be an official announcement.
The transaction would be in line with Telenor’s strategy of reducing risk and unlocking more value from its Asian business units, Mads Rosendal, a credit analyst at Danske Bank, wrote in a note to clients.
“The potential for higher pricing power and capex synergies from a True deal would be positive, also in light of recent weak results from DTAC, which still has not recovered to pre-pandemic operating metrics,” he said.
A Thai telecom specialist who requested anonymity said speculation regarding the merger of True Move H Universal Communication (TUC), the mobile arm of True, and DTAC TriNet, the operator of the DTAC mobile service, had been rife for a few weeks among major investors in the SET.
The talks between the two parties have been acknowledged among bankers for years, the specialist said.
The source said True and DTAC were likely to form a joint venture under a share swap model.
CP has a 50% stake in True while China Mobile holds 18%. TUC is 100% owned by True. Telenor holds a 65% share in DTAC (both directly and indirectly). DTAC wholly owns DTAC TriNet.
TUC and DTAC TriNet would close down following the share swap between the two parent firms, the source said, adding that the deal could be signed as soon as this weekend and announced on Monday.
“It is the same as what Telenor did in Malaysia,” the specialist said.
Suphachai Chearavanont, chief executive of CP and chairman of the board of True, told the Bangkok Post earlier this month that telecom operators need to strengthen their competitiveness by reducing redundant investment and ensuring competitive costs.
If telecom firms are troubled by high costs, they will become weakened and it will be hard for them to create new technology and scale as regional players, he said.
Telenor shares were trading 1.1% higher on Friday. DTAC shares closed on Friday on the SET at 41.25 baht, up 25 satang from the day before, in trade worth 2.1 billion baht. True shares fell 6 satang to 4.32 baht, in heavy trade worth 5 billion baht.