The takeover of Triple T Broadband (TTTBB) by Advanced Info Service (AIS) is expected to create a synergy value for AIS of 9.65 baht per share, or 4.3% of its market price, while True Corporation should also benefit from market rationalisation, according to an analyst.
The fixed broadband internet market is set to become more rationalised through less intense competition and the penetration rate (on a per household basis) is expected to reach 80% in the next 3-5 years compared to 50% at present, said Pisut Ngamvijitvong, senior equity research analyst at Kasikorn Securities (KS).
Mr Pisut said the brokerage believes the deal will optimise the operating expenses and capital expenditure to improve the investment return of the fibre broadband internet service industry.
On Nov 10, the board of the National Broadcasting and Telecommunications Commission (NBTC) approved AIS's proposed takeover of TTTBB, known for its 3BB brand.
Five of the seven commissioners took part in the special meeting to consider the deal. In the evening session, four of them voted to approve the deal: Suphat Suphachalasai, AM Thanapant Raicharoen, Pirongrong Ramasoota and Somphop Purivigraipong. The other commissioner, Torpong Selanon, abstained from voting.
NBTC chairman Dr Sarana Boonbaichaiyapruck and Pol Gen Nathathorn Prousoontorn did not take part. Both insisted the NBTC board has no authority to approve or disapprove of the deal but can only acknowledge the deal and issue remedies governing it.
The four commissioners also voted to issue remedy measures for the deal. Among these is a measure prohibiting AIS (which includes TTTBB) from increasing the service price for five years.
It will also have to draw up a five-year plan for fixed broadband network expansion with a total investment of at least 10 billion baht, in addition to its existing network expansion plan.
There are many fixed broadband internet players in the market, with only four major operators: True, AIS, 3BB and National Telecom (NT).
As of the third quarter, True had 3.79 million fixed broadband subscribers, generating 5.9 billion baht, AIS 2.38 million subscribers creating 3 billion, and TTTBB 2.31 million subscribers generating 4.1 billion.
After the deal, AIS will become the market leader with 4.69 million subscribers and 7.1 billion baht in quarterly revenue, accounting for 42% of subscribers and 47% of revenue.
COMPLETION WITHIN 14 DAYS
If there are no lawsuits filed against the deal, KS said AIS's board should complete the acquisition within two weeks.
Any potential lawsuits might cause the board to hold the transaction, pending a court ruling, said the brokerage.
KS has a positive sector view based on the improving competitive environment in both the cellular and fixed broadband markets, amid upside risk to its earnings forecast.
AIS proposed acquiring a 100% stake of 3BB for 19.5 billion baht and a 19% stake of the Jasmine Internet Infrastructure Fund (JASIF) at the adjusted value of 12.92 billion baht after deducting JASIF's dividend payment over the past five quarters.
JASIF is responsible for leasing internet networks to 3BB.
KS believes JASIF stands to benefit from a better borrowing deal and lower default risk, resulting in a higher distribution yield and a 12% rise in target price.
Despite concerns over JASIF's business continuity after the end of the lease contract between 3BB and JASIF in 2038, Mr Pisut said KS has a more positive view of JASIF's risk profile due to the financial strength of the fund's new major shareholder AIS.
KS believes the JASIF manager, BBL Asset Management Company Limited, will resume negotiations with Bangkok Bank to adjust the borrowing rate to reflect the lower default risk of AIS, JASIF's new sponsor, and extend the debt repayment schedule to reflect the longer lease contract from 2032 to 2038.
KS upgraded its rating for JASIF from neutral to outperform with a new target price of 6.95.