Jasmine International Plc (JAS), its subsidiary Triple T Broadband (TTTBB), and Jasmine Broadband Internet Infrastructure Fund (JASIF) met investors at a recent roadshow to clarify the issues surrounding TTTBB proposals to terminate and amend the agreements on seeking benefits from the infrastructure asset.
TTTBB delayed its lease payment to JASIF, leading to incomplete payments under a related agreement.
There are agenda items by JAS to terminate and amend the related contracts at an extraordinary general meeting of JASIF unitholders scheduled for Aug 23.
JASIF owns optical fibre cables that are leased by TTTBB to provide its broadband internet service under the 3BB brand. JAS is the biggest unitholder of JASIF with a 19% stake.
JAS informed BBL Asset Management Co Ltd, the JASIF fund manager, in July that TTTBB is dealing with a liquidity shortage as a result of many unfavourable conditions.
As a result, TTTBB was unable to pay the rent under the amended and restated rental assurance agreement.
JAS requested an extraordinary general meeting of JASIF unitholders to consider many related issues, including the termination of the amended and restated rental assurance agreement and the amended and restated marketing services agreement.
JAS also asked for the meeting to consider the amendments to the amended and restated main lease agreement, the key details of which are the extension of the contract term from the original expiration date of Jan 29, 2032, to Dec 31, 2038.
Subhoj Sunyabhisithkul, acting chief executive of JAS, said at an investor roadshow the backdrop involves fierce competition in the home broadband industry, with Thai consumer purchasing power eroded by the pandemic as well as the Russia-Ukraine war.
TTTBB transferred fibre assets to JASIF to finance expansion of its fibre-optic cable network.
Mr Subhoj said JAS and 3BB have high lease costs, making them uncompetitive with other broadband players in the market. This led to the lack of liquidity, as revenues did not cover rising expenses, leading to unintended impacts for both companies, he said.
Soraj Asavaprapha, JAS chairman, said at the roadshow the company is trying to remedy the situation by ensuring adequate cash flow.
He said the most important expense is the licence fee, which TTTBB paid to the National Broadcasting and Telecommunications Commission (NBTC) as it was overdue since May 2023.
If the licence fee remained unpaid, the licence could have been revoked by the regulator, rendering TTTBB unable to operate broadband and related businesses.
Such a move would have had severe impacts, particularly on JASIF, which is an important trade partner, said Mr Soraj.
Pornchalit Ploykrachang, deputy managing director of BBL Asset Management, said as fund manager, generating sustainable returns is its key priority.
If the main network lessor 3BB had its telecom licence revoked, then JASIF would have no rental revenue, he said.
As for termination of the amended and restated rental assurance agreement, despite an expected loss of roughly 20% of the rental cash flow, the fund's ability to secure 80% of the remaining cash flow is the preferable option, said Mr Pornchalit.
He said despite a reduced initial cash flow, the longer term for the main lease agreement will increase the fund's total cash flow to roughly 32 billion baht, which means increased dividends for unitholders.
This amount is 5-6 billion baht higher than the request to amend the leasing contract previously proposed by Advanced Wireless Network (AWN), said Mr Pornchalit.
Advanced Info Service (AIS), the parent of AWN, announced in July last year its plan to acquire TTTBB and buy a 19% stake in JASIF. AIS is pursuing the acquisition through AWN.
Some investors questioned why the main lease contract has to be amended when AWN will become the new JASIF sponsor.
Mr Soraj said the request to amend the lease contract illustrates JAS's intention to take responsibility.
"We still do not know when AWN's deal to purchase 3BB and JASIF will be completed, as it awaits NBTC approval," he said.
JAS must take responsibility and remedy these issues for every stakeholder in advance of the purchase, said Mr Soraj. The company does not want to see JASIF rental revenues drop to zero. If TTTBB has a problem regarding licence payments, this would have a direct impact on business operations, he said.
"The request to amend the contract according to the terms outlined is the best alternative because it benefits every party and will make the JASIF fund more resilient. In the worst-case scenario, which is the AWN deal is rejected by the regulator, we must build strength for the JAS business to continue," Mr Soraj said.
Mr Pornchalit said he wants unitholders to carefully consider this proposal because fund management believes the contract amendments are optimal for every party, particularly the JASIF fund, which should benefit in the long term. The proposal will secure the remaining 80% of total cash flow and reduce risks from 3BB potentially defaulting on lease payments, he said. The fund will receive higher total cash flow and a higher dividend per unit than under the existing contract, which benefits unitholders, said Mr Pornchalit.