The prospect of a merger between major mobile operators Total Access Communication Plc (DTAC) and True Corporation Plc has become more likely as DTAC's parent firm Telenor has confirmed the two parties are in talks while True did not deny it.
Norway's Telenor said in a statement that it is in talks with conglomerate Charoen Pokphand (CP) Group, the parent of True, to explore the possibility of a merger between DTAC and True.
"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 comment at this stage of the process," Telenor said.
True, meanwhile, did not reject the report.
Yupa Leewongcharoen, chief financial officer of True, told the Stock Exchange of Thailand (SET) that if there is any clarification required to be reported to the regulator, it will inform the SET accordingly.
When reached by the Bangkok Post, a highly placed source at True did not comment on the report.
Meanwhile, DTAC refused to comment on the issue when reached by the Bangkok Post, saying there will be an official announcement about it.
DTAC is currently valued at around US$3 billion and True at around $4.5 billion, according to Refinitiv Eikon data.
True has a total mobile subscriber base of 32 million while DTAC has 19.3 million. Advanced Info Service (AIS), Thailand's largest mobile operator by subscriber base, has 43.7 million.
A telecom specialist who requested anonymity said speculation regarding the merger of True Move H Universal Communication (TUC), a mobile arm of True, and DTAC TriNet, a mobile operator of DTAC, has 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.
According to the source, True and DTAC are likely to form a joint venture under a share swap model between the two.
CP has a 50% stake in True while China Mobile holds 18% in True. True holds a 100% share in TUC.
Telenor holds a 65% share in DTAC (both directly and indirectly). DTAC wholly owns DTAC TriNet.
TUC and DTAC TriNet will close down following the share swap between the two parent firms. The deal is likely to be inked by this weekend and announced on Monday, the specialist said.
"It is the same as what Telenor did in Malaysia," the specialist said, referring to the move by Telenor in June to sign a deal with Malaysian telecoms firm Axiata Group Bhd to merge their mobile operations in Malaysia in a $15 billion deal, forming a new market leader there.
Telenor, the specialist said, can say that it is not exiting the Thai market but changing the business model of its operation.
Sigve Brekke, president and chief executive of Telenor, said at a webinar in October that the company was still committed to long-term investment in Thailand.
He said the company, which has operated in Thailand for 20 years, is looking forward to the next 20 years in business in the country, adding the company wants to be seen as a contributor to the overall society.
Suphachai Chearavanont, chief executive of CP and chairman of the board of True Corporation, told the Bangkok Post early this month telecom operators need to have encouragement to strengthen competitiveness by reducing redundancy investment and ensure competitive cost.
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.
Pisut Ngamvijitvong, an analyst at Kasikorn Securities, said if True succeeds in acquiring DTAC, True will become the market's leader and its mobile phone market share will rise from 32% to 53%, while AIS will become the second at 47%.
He said a price war is unlikely to happen since the two players will have nearly equal market shares and similar infrastructure resources.
He said if the deal is true, it's possible that True will use the share swap method to merge with DTAC.
"Our study shows potential shares upside should be 7.8-41.5% for DTAC and 10.4-32.4% for True from the current market prices," he said.