Massive Divestment In Thailand....

[Dutchy]

ABN Amro on the way out, Orange SA follows suit in just two weeks time...

MASSIVE DIVESTMENT: Orange SA sells stake in Thai unit

Published on Mar 10, 2004

European giant takes $550-m bath

Giant European telecom operator Orange SA will sell a 39-per-cent share in TA Orange to TelecomAsia Corp Plc (TA) for just Bt1, effectively heading for an exit from Thailand following an investment that cost it US$550 million (Bt21.5 billion).

TA Orange chief executive Supachai Chearavanont said yesterday that Orange had agreed to sell 819 million shares – or a 39-per-cent stake – in Bangkok Inter Teletech (Bitco), which owns around 99.81 per cent of TA Orange, to TA for Bt1.

The move comes only weeks before TA Orange was due to refinance a Bt33-billion debt, which is due this month.

The transaction price of Bt1 is for legal and accounting purposes, since the fixed-line carrier TA will have to assume TA Orange’s entire debt burden.

“The move is in response to (Orange SA’s) plan to solely focus on the European market,” Supachai said.

TA’s share price closed yesterday at Bt8.05, up from Bt7.7.

Orange invested about $550 million in the Thai cell-phone joint venture launched in March 2002 which today has about 1.9 million subscribers, representing an 8-per-cent market share.

The share sale will dilute Orange’s holding in the cell-phone operator to 10 per cent, while increasing TA’s stake to 82.86 per cent from the present 43.86 per cent.

The share of TA’s parent firm, Chareon Pokphand, in TA Orange remains at 7 per cent.

Orange will allow TA Orange to continue using its brand – for three years without paying license fees – instead of paying Bt400 million per year as is the case now.

But once TA Orange launches its brand True, the fee-free period will be reduced to six months.

TA is expected to have its business group, including TA Orange, start using the True brand soon.

A foreign investment-bank source said Orange is also mulling a departure from another Asian market where it has not invested but granted brand licences to local operators.

“But it’s still holding a 10-per-cent share in TA Orange with plans to take the upside later, when TA Orange lists on the Stock Exchange of Thailand,” the source said

TA and Orange will also forgive TA Orange’s debts to them of up to Bt200 million each, but the deal represents no windfall to TA.

“The deal means TA will have to shoulder the financial burden of TA Orange alone,” said a telecom analyst at a foreign brokerage.

Supachai said TA Orange is expected to complete its debt refinancing by the middle of this year and would raise around Bt6 billion to extend the network before listing on the stock exchange.

He added that TA has enough cash – Bt7 billion – to back up TA Orange’s recapitalisation.

“If it’s not enough, we’ll raise more from the stock market,” Supachai said.

But TA Orange’s share increase must in the future not dilute Orange’s stake to less than 4 per cent, he added.

In the next step, TA will look to boost synergies with TA Orange to increase its corporate strength, he said.

Supachai said that this year TA Orange was targeting 2.7 million customers and Bt15 billion in revenue.

A source close to TA Orange said the situation there is expected to improve once TA has the biggest say in the company.

“Having both foreign and local partners on the same boat often makes it difficult to reach agreement,” he added.

He said Supachai yesterday e-mailed all TA Orange staff to say “the golden era of TA Orange has come”.

The share sale of Orange is subject to approval at a TA Orange shareholders’ meeting on April 9.

But TA stated that if TA Orange was unable to complete the refinancing before September 29, it would not buy the shares and all other agreements would be void.

Usanee Mongkolporn

The Nation