Temasek has no plans to sell AIS to SingTel

Published January 24, 2006 Investments MD says GO waivers do not mean it's selling
Shin's other listed units By SIOW LI SEN (SINGAPORE) Temasek
has no intention of selling its newly acquired Thai telco unit Advanced Info Service
(AIS) to Singapore Telecommunications, and neither is it about to asset-strip
Shin Corp. 'We made this investment independent of SingTel . . . We have no plans as of now to sell to SingTel,' said S Iswaran, Temasek's managing director of investments, yesterday in a conference call with the Singapore press. He also said it would be a 'wrong conclusion' to make that Temasek would sell off Shin Corp's other associates, Shin Satellite, ITV and CS LoxInfo - all of which are listed on the Stock Exchange of Thailand - because Temasek has a waiver on making a general offer for the three associates. Shin's other assets include a half-share in Thai AirAsia, a joint venture with the Malaysian budget airline. There had been speculation that Temasek was keen only on AIS where Shin owns 42.82 per cent, the crown jewel among its varied assets - and that once the Singapore investment company bought the entire 49.25 per cent stake in Shin Corp from the family of Thai Prime Minister Thaksin Shinawatra, it would sell off the other assets. It was suggested also that as parent of SingTel, Temasek might move to consolidate the two companies given that SingTel has always stated its desire of increasing its stake in 21 per cent-owned AIS. Yesterday, a Temasek-led consortium paid 73.3 billion baht (S$3 billion) for the entire 49.25 per cent stake, representing 49.25 baht per share. Under Thai takeover rules, the consortium now has to make a general offer for the remaining Shin Corp shares at the same price, 49.25 baht. The financing for the acquisition will be a combination of equity and bank loans, said Mr Iswaran, adding that Temasek will take the most competitive financing
offer. In that, he was responding to talk that only Thai banks will participate
in the funding arrangements. Under Thai takeover rules, Temasek has to make an
offer for associates in which Shin owns more than 25 per cent, and the consortium
is offering 72.31 baht per share of AIS shares it does not already own. Asked
if SingTel would sell to Temasek, spokesman Peter Heng said: 'We would like to
increase our stake in the associates at the right price and terms, and we will
continue to explore all options.' Mr Iswaran, when told of SingTel's intention,
said the Singapore telco has to make the decision in the best interests of its
company and its shareholders. Whatever Temasek's intentions regarding AIS in the
future, the current offer it has made to all AIS shareholders of 72.31 baht per
share seems designed to fail. AIS ended yesterday unchanged at 104 baht and the
lowest it has traded at in the past 12 months is 90 baht. The Thai takeover panel
has said that Temasek is not required to make 'chain principle offers' in the
case of Shin Satellite, ITV and CS LoxInfo, which collectively account for not
more than 10 per cent of Shin Corp, said Mr Iswaran. It would be a 'wrong conclusion' to make from the waiver given on the chain principle offer, that Temasek intends to sell off the three companies, he said. 'In not making a chain principle offer does not mean we are not interested in them or that we would sell them,' he said. 'From a business point of view, we would explore all opportunities to grow these businesses and create value.' Mr Iswaran said Temasek and its co-investors will work closely with Shin Corp management to understand the business and how to help it grow. Temasek got into the investment purely on commercial terms and is a medium to long-term investor in Thailand, he said. As to how Temasek can add value, he said it is investing in a company that is 'already a strong player in the Thai
market with a strong management team'. The expertise resides in the company and
its management; Temasek's value through its three board members will be international experience and other expertise, he said. Analysts said Temasek represents a new wave of international investors in Thailand's telco sector, which is poised to upgrade to 3G mobile systems which need advanced technology requiring huge investments. Tucker Grinnan of HSBC Asia telco equity research said Thailand already has a fairly developed penetration rate for mobile phones at 45-46 per cent. 'In Thailand as elsewhere in Asia, the interest is in the 3G . . . you will see interest from a lot of international investors, be it Temasek, DoCoMo or Vodafone,' Mr Grinnan said. 'They are part of a broader wave of international investors. 3G is at an inflexion point - it forces out the weak players and encourages strong players to come in.' But some observers caution that Temasek could run into potential problems investing in a mass consumer utility in a developing country. 'For example, if Shin Corp wants to increase rates and the poor people are not happy or some business people are upset, they might point to its foreign investors and say they have no love for the country, or question its loyalty,' said Teng Ngiek Lian, founder of Target Asset, a fund manager. To this, Mr Iswaran said that Thailand's telco sector is very competitive, including its rates.