Cabinet decision could clear way for True-Hutch deal

29 Dec 2010

The Thai Cabinet has approved state-owned CAT Telecom’s decision to cancel a plan to buy 100% of its Bangkok-based ‘Hutch’ branded CDMA mobile joint venture from partner Hutchinson Telecommunications International (HTI). The cancellation of the takeover of Hutchison CAT Wireless Multimedia (HCWM), currently 75% owned by HTI and 25% by CAT, could help clear the way for private sector Thai cellco True Move to complete a proposed purchase of HCWM instead. The news on 28 December 2010 sent the share value of True Move’s parent True Corp up 5%, Reuters reports. True’s stock has risen 43% in the past three months on speculation that buying the CDMA business and its associated wireless spectrum in Bangkok and central provinces could speed up the rollout of 3G services.

Earlier this month, the Bangkok Post reported that True could fail in its takeover bid for the Hutch mobile business unless legal disputes between CAT and Hutch worth more than THB1 billion are settled, according to the chief of CAT. However, a True executive expressed confidence that the Hutch takeover is not a dead deal as a new marketing contract could end all legal hurdles and disputes. The Council of State, the government’s legal advisory body, has said that even though Hutch’s business is partially covered by the 1992 Public-Private Joint Venture Act, applicable to Hutch’s use of radio frequencies, construction of basic infrastructure and its marketing, the proposed takeover by True Move could proceed simply by terminating the existing marketing contract and replacing it with a new one. CAT president Jirayuth Roongsrithong said that thorny legal issues remain between CAT and Hutch over excise tax, numbering fees and interconnection charges. True vice-chairman Athueck Asvanont acknowledged that the existing contract faced many problems as the law did not allow private companies to own networks directly, whilst Jirayuth said that even though the Council of State has said that the Hutch business falls under the Joint Venture Act as it is worth more than THB1 billion, its business structure could not breach the law. It is understood that if True succeeded in taking over the Hutch operation, it would have no need to comply with Section 22 of the Act, because the business would operate under a new shareholder structure.

The Council of State had ruled on two occasions that the Act applies to Hutch: in 2004 when CAT wanted to open bids to create a nationwide CDMA network (which it eventually did separately from HCWM, under the CAT CDMA banner), and in 2008 when CAT proposed to buy the Hutch network in the central provinces (a deal which fell through in 2010). Mr Jirayuth said CAT had taken no legal action over the complex Hutch contract over the past two years because it was negotiating to buy the network assets from a subsidiary of HTI. If the takeover had succeeded, CAT could have immediately terminated all existing contracts with Hutchison. However, Hutchison recently rejected CAT’s request to bring the selling price down from THB7.5 billion to THB4 billion, opening up an opportunity for True Move.

Thailand, CAT Telecom, Hutch (Thailand), True Move