True Agrees Takeover Deal With Hutchison Telecom

[george]

True Corp agrees takeover deal with Hutchison Telecom

By Usanee Mongkolporn

BANGKOK: -- True Corp has reached an agreement with Hong Kong giant Hutchison Telecom for the takeover of the latter's business in Thailand in a deal worth about Bt6.3 billion.

The total value of the share purchase in four Hutch firms is more than Bt4.3 million, plus the plan of a True subsidiary to lend not more than Bt6.3 billion to BFKT (Thailand), the network operator in the Hutch group, to repay debt.

The deal will pave the way for its subsidiary to resell CAT Telecom's CDMA (code division multiple access) 2000-1x cellular service and the planned third-generation HSPA (high-speed packet access) service.

Recently True chief executive officer Supachai Chearavanont said the revenue contribution from Hutchison-CAT Wireless MultiMedia would boost TrueMove's revenue growth to 17 per cent if it could buy the Hutch business. TrueMove is True Corp's flagship.

Hutch-CAT generated roughly Bt4.8 billion in revenue in 2009. It shares 20 per cent of its revenue with CAT. TrueMove's revenue share with CAT is 25 per cent and is set to increase to 30 per cent in the fourth quarter of 2011.

True said in a filing to the Stock Exchange of Thailand yesterday that its wholly owned subsidiaries Real Move Co and Real Future Co had entered share sale and purchase agreements with Hutchison Wireless MultiMedia Holdings (HWMH), BFKT (Thailand), Rosy Legend (RL) and Prospect Gain (PG).

True, Real Move, and Real Future would neither be a guarantor nor in any way be responsible for any debts these Hutch companies owed their creditors, it said.

After the acquisition of shares in BFKT, Real Future would make a loan to BFKT in an amount not exceeding Bt6.3 billion, with BFKT to use the proceeds partially to repay its indebtedness.

True said this loan would not affect True's consolidated financial statements, since after the acquisition of shares in BFKT, this debt would not appear in the statements.

BFKT built a CDMA network in 25 provinces and leased it to Hutchison-CAT to market mobile-telephone service under the Hutch brand and under a CAT marketing contract. CAT also owns a separate CDMA network in 51 provinces, which provides service under the CAT CDMA brand.

BFKT carried Bt16 billion debts on its books in 2009, while Hutch-CAT has Bt34 billion in debts. While Hutch-CAT reported a Bt2.9-billion net profit in 2009, BFKT recorded a net loss of Bt1.6 billion.

BFKT will still be the lessor of telecom network equipment to CAT and continue to be a provider of maintenance services for the network. Emphasis will be made on rental and maintenance services for CAT's planned HSPA network and service throughout Thailand.

Real Move will be a reseller of service and capacity of the mobile-phone network that it will purchase from CAT for providing mobile-telecom business.

Hutchison-CAT will still do marketing for CAT CDMA mobile-phone customers and will not expand those services but aims to migrate all CDMA customers to HSPA within two years.

However, it remains unclear whether CAT can grant a resale deal to any parties without risking violation of the new Frequency Allocation Law.

The law obligates licence holders to provide their own services on their spectra, rather than granting partial or whole rights of spectrum management to other parties to provide service on their behalf.

Recently True vice chairman Athueck Asvanand said he was confident the resale deal would not violate the law.

True launched talks with Hutch on the deal after CAT recently aborted its own talks on a similar deal with the Hong Kong company. CAT offered Bt4 billion to buy the Hutch business but Hutch wanted Bt7 billion for the sale.

Late this week CAT chief executive officer Jirayuth Rungsrithong said CAT would be open for any firm to become its reseller and it was also interested in owning shares in the resellers.

TrueMove has about 16 million subscribers on its own GSM (Global System for Mobile Communications) network, while Hutchison-CAT has 700,000-800,000 subscribers and CAT CDMA has about 350,000.

After the acquisition, the seven companies, HWMH, BFKT, RL, PG, Hutchison MultiMedia Services (Thailand) (HMSTL), Hutchison Telecommunications (Thailand) (HTTCL), and Hutchison-CAT Wireless Multimedia, will become True subsidiaries.

HMSTL and HTTCL are wholly owned subsidiaries of BFKT. Hutchison-CAT is 73.92 per cent owned by HWMH.

True's share price closed at Bt7.10 yesterday, down 1.39 per cent.

-- The Nation 2010-12-31

[woodyleonhard]

I've seen this figure reported in several places, not just The Nation:

The total value of the share purchase in four Hutch firms is more than Bt4.3 million

It looks like a typo to me. The four Hutch firms - Hutchison Wireless MultiMedia Holdings (HWMH), BFKT (Thailand), Rosy Legend (RL) and Prospect Gain (PG) - are worth upwards of B 4 BILLION, aren't they?

Can anyone confirm?

It's an odd arrangement, if I understand correctly. True's subsidiaries buy Hutch's subsidiaries, then one True subsidiary agrees to loan one of the old Hutch subsidiaries B 6.3 billion. Yet True claims its acquisition doesn't include the outstanding indebtedness of the Hutch subsidiaries.

[nikster]

Hutchison-CAT will still do marketing for CAT CDMA mobile-phone customers and will not expand those services but aims to migrate all CDMA customers to HSPA within two years.

Huh? What HSPA service are they talking about?

The deal is very confusing - however, I am not going to bother to sort out the details because with any telecoms purchase, half the reasons of why this or that happens are not written down in any newspaper, and they invariably have to do with some government or business entity getting money for nothing, also called bribes in other countries, except in the Thai telecoms sector most of it is legalized with a system of bizarre laws that make absolutely no sense except when you look at who's getting the money in the end.

I am convinced most telecoms laws in this country actually are good only for one thing: Slicing up the pie. They're not good for fostering competition, or doing anything for the people, or Thailand in general. Making it very complicated is the simplest way of hiding the money trail, every accountant knows that.

[woodyleonhard]

@Nikster -

The HSPA service is the "3G" service from True and DTAC, using CAT's spectrum.

TOT had some announcements earlier this week about working with AIS and other "MVNO"s. They're all talking about HSPA (or "3G"). It remains to be seen if any of the companies will have the guts to leapfrog directly to LTE, WiMax, or HSPA+, or even LTE+ or WiMax 2 (so-called "4G").

Agreed that the deal is very confusing. And I agree completely with your statement:

I am convinced most telecoms laws in this country actually are good only for one thing: Slicing up the pie.

But the telecoms laws in EVERY country are about slicing up the pie. Spectrum allocation is at the heart of all of it.

I don't see this announcement (if I understand it) as being anything underhanded, or a manifestation of bribery. On the contrary, I think it's great that TOT is challenging CAT, buying out Hutch, and bringing some better technology to bear. The news I've seen over the past two weeks - with TOT ousting its CEO, and all sorts of competitive alignments and re-alignments - means that less will be done in secret meetings, and more in the open marketplace.

That's good for everybody. Even CAT and TOT, although they probably don't believe it.

Privatizing telcos is a messy business in every country. We're just a little behind the times.

Edited December 31, 2010 by woodyleonhard

[MJo]

More like 40 years behind, places like Uganda in 70's and more lately Zimbabwe comes to mind...

All of the private telcos would go for "3G" or LTE or anything else in a heartbeat if they would be allowed to do so. Unfortunately they are still blocked from frequencies for basic 3G just to keep TOT and CAT alive and bringing the money into the pockets of a few. This been going on for 10 years or so, it was something like 2002 or 2003 when they first were going to auction frequencies for 3G "by the end of the year"...

[woodyleonhard]

More like 40 years behind, places like Uganda in 70's and more lately Zimbabwe comes to mind...

All of the private telcos would go for "3G" or LTE or anything else in a heartbeat if they would be allowed to do so. Unfortunately they are still blocked from frequencies for basic 3G just to keep TOT and CAT alive and bringing the money into the pockets of a few. This been going on for 10 years or so, it was something like 2002 or 2003 when they first were going to auction frequencies for 3G "by the end of the year"...

@MJo -

Well, yes and no. HSPA ("3G") is available everywhere in Bangkok proper, either through True or DTAC. HSPA is also available on the west coast of Phuket through True and DTAC, and the speeds are quite respectable - I've personally clocked 5 Mbps international download from the Sandwich Shoppe in Cherng Talay. See www.phuketinternetspeed.com

True and DTAC are NOT blocked from having HSPA/3G. This news item (at the top of the thread) says exactly the opposite: True is buying bandwidth to further develop their HSPA network in the 25 provinces surrounding Bangkok. What's been blocked, repeatedly, stupidly, is the auction of 2.1 GHz spectrum for HSPA (or LTE). But that doesn't keep any of the major players - True, DTAC, AIS - or even some previously-unknown companies from renting bandwidth at 850 MHz from CAT or TOT. In fact, TOT's CEO was recently fired, apparently because he was dragging his feet on sub-letting 850 MHz bandwidth to these other companies, specifically for HSPA/3G.

It's a complicated situation. I gave a talk at the International Business Association of Phuket last month about it, and explaining the details took up most of the hour. It's gotten more complicated since then - the people in charge at CAT and TOT know what they're doing, and they're trying hard to maximize their income. That's not unusual when a government-run telco starts losing its monopoly - precisely the situation we're seeing right now.

Thailand has HSPA ("3G"). It just doesn't have HSPA at 2.1 GHz. And the HSPA that it does have doesn't extend to the whole country. But, hey, you could say that about almost any other country - including the US. Remarkably, from what I've seen, HSPA speeds in Thailand are as good as those in the US. Hard to believe, but true - and independently verifiable.

The big question, to my mind, is whether any of the telcos have the cojones to leapfrog to LTE (or HSPA+) and drop HSPA entirely.

FWIW, there are technical reasons why HSPA (and LTE) at 850 MHz is actually BETTER than HSPA at 2.1 GHz.

[loser1]

Agreed

Edited January 2, 2011 by loser1

[loser1]

More like 40 years behind, places like Uganda in 70's and more lately Zimbabwe comes to mind...

All of the private telcos would go for "3G" or LTE or anything else in a heartbeat if they would be allowed to do so. Unfortunately they are still blocked from frequencies for basic 3G just to keep TOT and CAT alive and bringing the money into the pockets of a few. This been going on for 10 years or so, it was something like 2002 or 2003 when they first were going to auction frequencies for 3G "by the end of the year"...

@MJo -

Well, yes and no. HSPA ("3G") is available everywhere in Bangkok proper, either through True or DTAC. HSPA is also available on the west coast of Phuket through True and DTAC, and the speeds are quite respectable - I've personally clocked 5 Mbps international download from the Sandwich Shoppe in Cherng Talay. See www.phuketinternetspeed.com

True and DTAC are NOT blocked from having HSPA/3G. This news item (at the top of the thread) says exactly the opposite: True is buying bandwidth to further develop their HSPA network in the 25 provinces surrounding Bangkok. What's been blocked, repeatedly, stupidly, is the auction of 2.1 GHz spectrum for HSPA (or LTE). But that doesn't keep any of the major players - True, DTAC, AIS - or even some previously-unknown companies from renting bandwidth at 850 MHz from CAT or TOT. In fact, TOT's CEO was recently fired, apparently because he was dragging his feet on sub-letting 850 MHz bandwidth to these other companies, specifically for HSPA/3G.

It's a complicated situation. I gave a talk at the International Business Association of Phuket last month about it, and explaining the details took up most of the hour. It's gotten more complicated since then - the people in charge at CAT and TOT know what they're doing, and they're trying hard to maximize their income. That's not unusual when a government-run telco starts losing its monopoly - precisely the situation we're seeing right now.

Thailand has HSPA ("3G"). It just doesn't have HSPA at 2.1 GHz. And the HSPA that it does have doesn't extend to the whole country. But, hey, you could say that about almost any other country - including the US. Remarkably, from what I've seen, HSPA speeds in Thailand are as good as those in the US. Hard to believe, but true - and independently verifiable.

The big question, to my mind, is whether any of the telcos have the cojones to leapfrog to LTE (or HSPA+) and drop HSPA entirely.

FWIW, there are technical reasons why HSPA (and LTE) at 850 MHz is actually BETTER than HSPA at 2.1 GHz.

What would be the best way to get mobile (dongle) internet in the Tha Yang area(prachuap kiri khan near cha-am and would it be 3g?

[billd766]

More like 40 years behind, places like Uganda in 70's and more lately Zimbabwe comes to mind...

All of the private telcos would go for "3G" or LTE or anything else in a heartbeat if they would be allowed to do so. Unfortunately they are still blocked from frequencies for basic 3G just to keep TOT and CAT alive and bringing the money into the pockets of a few. This been going on for 10 years or so, it was something like 2002 or 2003 when they first were going to auction frequencies for 3G "by the end of the year"...

@MJo -

Well, yes and no. HSPA ("3G") is available everywhere in Bangkok proper, either through True or DTAC. HSPA is also available on the west coast of Phuket through True and DTAC, and the speeds are quite respectable - I've personally clocked 5 Mbps international download from the Sandwich Shoppe in Cherng Talay. See www.phuketinternetspeed.com

True and DTAC are NOT blocked from having HSPA/3G. This news item (at the top of the thread) says exactly the opposite: True is buying bandwidth to further develop their HSPA network in the 25 provinces surrounding Bangkok. What's been blocked, repeatedly, stupidly, is the auction of 2.1 GHz spectrum for HSPA (or LTE). But that doesn't keep any of the major players - True, DTAC, AIS - or even some previously-unknown companies from renting bandwidth at 850 MHz from CAT or TOT. In fact, TOT's CEO was recently fired, apparently because he was dragging his feet on sub-letting 850 MHz bandwidth to these other companies, specifically for HSPA/3G.

It's a complicated situation. I gave a talk at the International Business Association of Phuket last month about it, and explaining the details took up most of the hour. It's gotten more complicated since then - the people in charge at CAT and TOT know what they're doing, and they're trying hard to maximize their income. That's not unusual when a government-run telco starts losing its monopoly - precisely the situation we're seeing right now.

Thailand has HSPA ("3G"). It just doesn't have HSPA at 2.1 GHz. And the HSPA that it does have doesn't extend to the whole country. But, hey, you could say that about almost any other country - including the US. Remarkably, from what I've seen, HSPA speeds in Thailand are as good as those in the US. Hard to believe, but true - and independently verifiable.

The big question, to my mind, is whether any of the telcos have the cojones to leapfrog to LTE (or HSPA+) and drop HSPA entirely.

FWIW, there are technical reasons why HSPA (and LTE) at 850 MHz is actually BETTER than HSPA at 2.1 GHz.

While I can accept (sort of) the HSPA speeds are as good as the USA at the moment, could that be because there are only a limited number of customers using the system.

The nearest I can get to HSPA is nearly 50 km so it is academic to me but IF or WHEN 3G comes out in full force those speeds will go down the tubes when perhaps an extra 10 or 20 million customers go online unless the fibre optic backbone in the whole country is expanded and very quickly as well.

Will the companies not need very much bigger international gateways also?

I read that there are a few providers who already promise high up and download speeds which fall off as more users come on line.

Any network is only as good as its backbone.

It is similar to using a 6 inch pipe to pour water down from 10 outlets. If you add another 90 outlets it still cannot flow any faster down that pipe. You need a bigger pipe.

I am retired now but I spent my last 20 years building mobile networks in many countries including AIS, DTAC and BFKT/Hutch here in Thailand.