http://www.atimes.com/atimes/Southeast_Asia/LB03Ae01.html
Feb 3, 2010
Temasek and Thaksin lost in space
By Peter Brown
When Singapore's state-run investment arm Temasek Holdings bought Thailand's Shin Corp telecommunications conglomerate in 2006, its 73 billion baht (US$2.2 billion) acquisition of Shin Satellite was a strategic afterthought.
Temasek was known to have purchased Shin Corp from company founder and then Thai premier Thaksin Shinawatra for its exposure to Thailand's fast-growing mobile telecom market.
The politically charged transaction came just months before Thaksin was ousted in a military coup. After Temasek's purchase, a military appointed government de facto nationalized Shin Corp's iTV on charges the television subsidiary had violated its state operating concession. Now, Shin Satellite is indirectly embroiled in a closely watched court case that threatens to seize permanently US$2.3 billion of the now exiled Thaksin's frozen assets on corruption charges.
The charges include allegations that Thaksin's government illegally granted Shin Satellite a preferential eight-year tax holiday on its foreign operations, a policy that prosecutors have claimed cost the state over 16 billion baht in lost revenues. The decision in the case is due on February 26, and according to analysts it's unclear what legal implications a guilty verdict would have on the Temasek-owned company's finances and state concession agreement.
Temasek's investment in Shin Corp's mobile telecom arm, Advanced Info Services, has been profitable and promises new revenue streams with the belated launch of third-generation, or 3G, services in Thailand. Yet as political risks rise, there have been reports in the Thai media suggesting that Temasek may try to unload its 41% majority stake in Shin Satellite, which it recently re-branded as Thaicom, apparently to disassociate the company from its past links to Thaksin.Market analysts have suggested that Thailand's Samart might be interested in the stake, but there is no indication that a transaction is either feasible or imminent.
While revenues have grown, Thaicom has not turned a profit in years and its regional outlook dimmed substantially amid the global economic downturn. According to Thomson Reuters, the sale of bonds worth 7 billion baht in November will help Thaicom repay debts and issue a dividend to shareholders this year - the first paid out since 2004. While official figures have not been released, analysts estimate the company's net loss was around 349 million baht in 2009.
Thaicom executives remain bullish about the company's 2010 prospects despite the fact its older satellites, Thaicom 1 and Thaicom 2, are coming to the end of their service lifetimes and it is not clear the company has a coherent plan to deal with the lost capacity. Meanwhile, sales for its $300 million Asia-wide iPStar broadband satellite remain sluggish, with only 10% to 15% of its total capacity leased.
According to Paris-based Euroconsult, a telecommunications consulting firm, Thaicom's "fixed satellite service-based revenues are expected to have stagnated or slightly decreased in 2009". It said that because both the Thaicom 1 and Thaicom 2 satellites are set to be phased out, the company will soon be unable to serve all of its existing customers.
Last year "Thaicom management proposed launching a new satellite to its board and shareholders, a request which was rejected," said Euroconsult. "Thaicom was asked to maximize the capacity of existing satellites while pursuing other options. The company is negotiating with the Thai government to have a better concession in order to buy a new satellite. Otherwise the company will have to rent a satellite for three to four years."
With the court case against Thaksin, it seems unlikely negotiations with the government will yield a better concession deal. Many had hoped that Singapore's takeover would have given the Thai-founded company a more global outlook and approach. According to Peter Evans, senior analyst for Southeast Asia at Australia-based BuddeComm,"Thaicom still seems to be a very 'Thai' company, with no indication that Temasek has put any special stamp - Singaporean or otherwise - on it."
Since the 2006 coup, political considerations have substantially raised Thaicom's risk profile. While the company's alleged preferential tax treatment is at the center of the latest corruption charges being heard against the exiled former premier, another future court case is expected to be filed over a loan by the government-owned Export-Import Bank of Thailand to Myanmar's government to purchase Shin Satellite services.
According to analyst Evans, a further political complication for Thaicom involves its mobile phone and satellite businesses in Cambodia. A simmering border dispute between Thailand and Cambodia has been a growing concern for Thai businesses in Cambodia, including Thaicom's subsidiary, Cambodia Shinawatra Co, which still bears Thaksin's family's name despite Temasek's ownership. It's unclear if Thaksin's recent controversial appointment as an advisor to the Cambodian government will mitigate those risks.
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