Merger details unveiled in the final lap of the planned amalgamation of True Corporation and Total Access Communication (DTAC) suggest DTAC's parent, the Norwegian firm Telenor, may want to serve as a passive or strategic investor rather than run the day-to-day operations of the new firm -- a sign of a soft exit from the Thai market.
One major indication is the boards of True and DTAC agreed to call the merged company True Corporation, according to filings submitted to the Stock Exchange of Thailand by the two firms on Thursday.
They also nominated True co-president Manat Manavutiveth to be chief executive of the merged firm, while DTAC chief executive Sharad Mehrotra was nominated to be his deputy.
The new merged firm is likely to be financially healthier than True is at present, thereby making it more attractive to stock investors, particularly institutional investors, according to Kasikorn Securities (KS).
A joint shareholders' meeting is scheduled for Feb 23 to approve the new corporate structure and other details related to the amalgamation, including the name of the merged firm.
A list of 11 people are going to be proposed as the merged firm's board of directors. Suphachai Chearavanont, chief executive of Charoen Pokphand Group -- True's parent -- was nominated to be chairman of the new firm's board, while Joergen Christian Arentz Rostrup, vice-chair of DTAC's board, was nominated to be vice-chairman.
The other nine people put forward are Kittipong Kittayarak, Kamonwan Wipulakorn, Kalin Sarasin, Pratana Mongkolkul, Gao Tongqing, Adhiruth Thothaveesansuk, Tone Ripel, Lars Erik Tellmann and Teerapon Tanomsakyut.
An allotment of 34.5 billion ordinary shares of the merged firm is going to be offered to shareholders with a par value of 4 baht per share. One existing share of True will become a 0.60018 share of the new firm, and one existing share of DTAC will become 6.13444 shares of the new company.
The amalgamation transaction is expected to be completed in the first quarter this year.
Nakul Sehgal and Yupa Leewongcharoen, the chief financial officers of DTAC and True, respectively, were nominated to be the co-chief financial officers of the new firm.
STRATEGIC INVESTOR
Pisut Ngamvijitvong, senior equity research analyst at KS, said the names proposed for the board of directors and management are expected to represent an equal partnership between representatives of DTAC and True.
However, the two firms' decisions regarding the name of the new firm and its senior leadership suggest Telenor may wish to become "a passive operator or a strategic investor" rather than dealing with day-to-day operations in the Thai market, he said.
"Telenor's representatives are expected to fill positions related to procurement and finance in the merged firm and focus on dividends or return on investment," Mr Pisut said.
The move reflects an early sign that Telenor may wish to exit the Thai market, although that may take time, he said.
"All the agenda items are likely to sail through the joint shareholders' meeting with ease as Telenor, CP and China Mobile represent 70% of the votes," Mr Pisut said.
ATTRACTIVE STOCK
According to KS, True is expected to book a net loss of 4 billion baht, while DTAC is expected to gain 1 billion baht in net profit for 2022.
The brokerage estimates Advanced Info Service will attain nearly 30 billion baht in net profit for 2022.
The new merged firm is likely to benefit from a larger spectrum capacity portfolio, more service shops and synergy approaches, which would strengthen its financial status.
"The merged firm's stock should be attractive for investors. At present, leading mobile operator AIS appears to be the sole stock in the telecom segment attracting interest from investors," Mr Pisut said.
KS said in its report it has a positive view on this merger development after the deal completion was delayed several times.
The clarity removes market anxiety that the deal might be cancelled or face an indefinite delay, which has weighed on the share prices of DTAC and True for some time, said the brokerage.
KS's report stated it would not be surprised if some investors decide to take profits once the share prices exceed the previous highs of 51.25 baht per share for DTAC and 5.7 baht for True (as of Feb 18, 2022).
"We are somewhat worried the share swap transaction, which keeps shares untradeable for a period of nine trading days, may trigger a selloff by institutional investors before the last trading day," the KS report noted.
"The target prices for DTAC and True are 58.43 baht and 6.28 baht, implying a target price for the merged firm of 10.32 baht," KS said.
It may take one or two years for the integration of DTAC and True into the merged firm through cultural and organisational management restructuring, KS said.