Posted On The 20th June From The Merlion City News.

[Preceptor]

TV unit of Temasek's Shin Corp faces $3b fines

But Thai broadcaster may not have to pay fines in full for unlicensed programming changes

(SINGAPORE) Temasek Holdings' purchase of Shin Corp in January from the family of Thai Prime Minister Thaksin Shinawatra has thrown up another problem - Shin's ITV unit faces a massive fine that could potentially wipe out all its assets.

The Thai government said yesterday the broadcaster must pay a fine that could be as high as 76 billion baht - a staggering S$3.19 billion - in a dispute over programming and retroactive fees.

Analysts, however, believe ITV will not have to pay such a huge sum, which is roughly 20 times the station's total assets.

Shin Corp, 96 per cent owned by Temasek, has a 53 per cent stake in ITV, which operates under a 30-year concession that ends in 2025. Temasek paid $3.8 billion for Shin Corp.

'We have no comment,' a Temasek spokeswoman said yesterday in response to a BT query on whether the Singapore investment company was aware of ITV's potential liability and whether it had made adequate provisions.

The dispute began in 2004 when ITV adjusted its programming without permission from Thailand's Prime Minister's Office (PMO). The matter was public knowledge and was mentioned in ITV's 2005 annual report under 'risk factors'.

According to reports yesterday, Rongpol Charoenphanthu, permanent secretary of the PMO, said after a meeting at the PMO that ITV must pay royalty fees plus penalties for programming changes that allowed the company to earn more from advertising revenue.

The PMO owns the concession licensed to ITV.

Thailand's Administrative Court last month revoked a decision by an arbitration panel two years ago that granted ITV a discount on concession fees.

The court also overturned the panel's decision to allow the network to replace some news and educational programming with entertainment.

Mr Rongpol was reported to have said that at yesterday's meeting it was decided that ITV will have to pay the fine, based on penalties contained in its original contract for a 30-year licence, as well as 1.7 billion baht in retroactive licence fees and interest on them.

ITV has filed an appeal with the Thai Supreme Administrative Court. A verdict is not expected before the end of the year.

ITV director Niwattumrong Boonsongpaisan has said the company will not take any action until after a ruling on its appeal against the Administrative Court's decision.

Seamico Securities assistant vice-president Pornsawat Jirajarus told BT he expects ITV will have to pay 1.7 billion baht in retroactive licence fees and interest plus 240 million baht for the programming dispute, but will not be hit for the full 76 billion baht.

'ITV has claimed the fine should be only 100 million baht a year, so the fine may be 240 million baht,' he said, referring to the period in which ITV adjusted its programmes, from April 2004, without permission from the PMO.

'I think it will still survive though it may affect the liquidity of the station,'' he said.

In the worst-case scenario of having to pay the full 76 billion baht fine and fee, the PMO might close the station, Mr Pornsawat said.

'We don't believe ITV will be able to pay such a high amount, which may lead the PMO to terminate the concession or restructure the penalty by converting it into equity, which would mean the state would become the majority shareholder,' he said.

This could mean ITV becoming an independent station, which was the intention when guidelines for the station's establishment were set during the tenure of former prime minister Anand Panyarachun, Mr Pornsawat said.

Shares in ITV, which operates Thailand's third most popular television channel, fell to a year's low of 2.8 baht yesterday and are now down 74.6 per cent since January.

Last month ITV reported a 36 per cent drop in net profit for first-quarter 2006 on weaker advertising revenues.

Shin Corp, Thailand's biggest telecommunications conglomerate, posted a 10 per cent drop for first-quarter net profit to 2.2 billion baht versus 2.5 billion baht previously.

[Martin]

Temasek Holdings owns and manages the Singapore Government's direct investments, both locally and overseas.

It amazed me that they bought Shin, given the possibility that the Thai people would feel that this was a significant part of their country's infrastructure being sold to a foreign government.

No wonder that the Temasek spokeswoman said "We have no comment". If you find that you have dug yourself into a hole, the wise thing to do is to stop digging!