China Mobile agrees to buy 18% stake in True Corp

10 Jun 2014

China Mobile, the world’s largest mobile network operator by subscribers, has agreed to buy an 18% stake in Thai quadruple-play telecoms group True Corp for USD881 million, reports Reuters. The deal follows years of speculation after True Corp indicated it wanted a foreign strategic investment partner to help develop its 3G and 4G mobile network business. In the share transaction, which forms part of a wider THB65 billion (USD2 billion) rights issue to strengthen its financial position, True Corp agreed to sell 4.43 billion shares to China Mobile at a value 13.4% discounted from its most recent traded price. The decision by True, owned by Thai billionaire Dhanin Chearavanont’s Charoen Pokphand (CP) Group, to opt for a Chinese partner underscores Dhanin’s strong political connections to mainland China, the Reuters report quotes sources familiar with the matter as saying, while noting that last year CP Group was the surprise buyer of HSBC’s USD9.4 billion stake in China’s Ping An Insurance Group, and has long-established investments in China’s agri-business sector (since 1979) plus the Shanghai-based Lotus supermarket chain. China Mobile, which plans to acquire the minority interest in True via its wholly owned unit China Mobile International Holdings, is being advised on the deal by China International Capital Corporation (CICC), while Deutsche Bank is advising True Corp.

True and China Mobile aim to cooperate on areas including technology and network construction, procurement sharing and new business opportunities. China Mobile’s CEO Li Yue said in a statement: ‘Through the proposed strategic investment in True Corp, China Mobile is expected to access new customers, international business opportunities and new earnings growth drivers, which is of great significance to the telecom business of the company.’ If completed, the foreign investment will help True combat rising debts and accelerate nationwide expansion of its 3G/4G networks to compete better with its two larger rivals in the Thai cellular sector, AIS and DTAC, backed by Singaporean and Norwegian groups respectively. True’s chief financial officer Noppadol Dej-Udom, quoted by the Bangkok Post, said: ‘We plan to use the proceeds from the [share] sale to repay our bank loans of THB52 billion in full,’ adding that the remaining THB13 billion would be reserved for bidding in Thailand’s upcoming auction of 1800MHz 4G licences in August this year.

In True Corp’s statement on its capital increase plan dated 9 June 2014, it resolved to issue 5.65 billion new shares to existing shareholders on a proportionate basis to raise THB36.43 billion (USD1.12 billion), based on the same share price as that offered to China Mobile – THB6.45 (USD0.198) per share – with a total of 10.077 billion new shares set to be issued. CP Group would purchase any unsubscribed shares to ensure True received the full planned USD2 billion via the rights issue. True will hold an extraordinary shareholders’ meeting to approve the capital increase and rights issue on 25 July 2014.

Thailand, China Mobile, China Mobile Communications Group, True Corp