Shin Corp found itself embroiled in a political maelstrom in 2006 when founder Thaksin Shinawatra, then prime minister of Thailand, sold his stake in the company to Temasek, Singapore's sovereign wealth fund. The sale, which saw Thaksin and his family make a $1.9 billion tax-free gain, sparked a public outcry and in the end Thaksin was ousted from power in a military coup.
The company has since been re-branded as Intouch Holdings but it continues to attract unwanted attention from time to time. In February, anti-government protestors called for a boycott of Thaksin-linked companies and targeted its mobile phone-operating unit Advanced Info Service (AIS), mobbing one of the company's office buildings in Bangkok.
At that time Intouch publicly said that Thaksin no longer held shares in the company. "We explain in many ways. We advertise in the newspapers, also in the social media," Somprasong Boonyachai, the CEO of Intouch, told FinanceAsia in an interview in Bangkok. "I also communicate [directly] with the protestors and with the leader. I tell them the fact: we are not related to your enemy," he said.
Thailand has been in a state of constant political turmoil since late last year when Prime Minister Yingluck Shinawatra, Thaksin’s sister, tried to introduce a political amnesty bill, which was viewed as an attempt to bring her brother back.
Intouch's attempts to distance itself from its founder have failed to entirely quell the public perception that it is linked to Thaksin. However, Boonyachai, who worked with Thaksin years ago and helped build AIS, remains optimistic. "For us, I think the storm is going away," he said. "I think the political impact to our company [will be] less and less. We have already changed the logo. This year we changed the name," he said.
However, the potential sale of Temasek's 41.6% stake in Intouch to its mobile unit SingTel could put the company under scrutiny again.
M&A bankers say that Temasek has been looking to divest its stake for some time. Even so, selling its entire stake to SingTel could be problematic for Temasek given the country’s takeover rules. Companies are required to make a mandatory takeover offer if their stake in a Thai-listed company crosses the 25% threshold. Under Thai laws also, a foreign company can only own up to 49% of a Thai telco and SingTel already owns a 23.4% stake in AIS, which is controlled by Intouch.
In 2006, Temasek acquired more than 90% of Shin Corp through two entities -- Aspen and Cedar-- in a complex nominee-structured deal where Temasek's stake was held through layers of ownership. Aspen was an indirect wholly owned subsidiary of Temasek and investment vehicle Cedar was 49%-owned by Temasek. Cedar’s other shareholders were Siam Commercial Bank and Kularb Kaew. Kularb Kaew, in turn, was 28% owned by Temasek unit Cypress with Thai investors owning the rest, according to Thai reports at that time.
Three years ago, when Shin Corp's share price recovered, Boonyachai said he recommended Temasek sell the stake it held through Cedar step by step, to reduce confusion over its ownership.
And in the past two years, Cedar has sold its stake in Shin Corp through a series of block trades. Boonyachai confirmed that Cedar no longer has a stake in Intouch. At present, Temasek has a 41.6% stake in Intouch, held through Aspen. "Everything is [now] clear because Aspen is only [a] 41% [stake], and now the distribution of shareholders is almost 50,000 shareholders," Boonyachai said.
When asked if a deal with SingTel deal could take place given Thailand’s takeover rules, Boonyachai declined to comment. "This is a shareholder matter. It's not our role," he said. However, he added, "I believe that whatever they do, they will follow Thai regulation. They are a professional company."
He also said that Temasek has not informed the company of any plans to sell its stake.
In the past, foreign companies have found ways to get around Thailand's tough foreign ownership laws. For example, Norwegian company Telenor controls Total Access Communication (DTAC), the number two mobile operator in Thailand, through a 42.6% direct stake and an indirect stake held by Thai Telco Holdings.
Occasionally, such foreign shareholding structures have come under scrutiny, none more so than those established by Singapore's sovereign wealth fund. "Temasek is always the target of criticism and outcry in Thailand," said one telco analyst in Bangkok, who declined to be named.
When asked to comment on reports of the potential stake sale, Stephen Forshaw, a spokesman for Temasek Holdings, said: "As a matter of policy, Temasek does not comment on market chatter, speculation and rumours." SingTel too declined to comment.
Business strengths
While Intouch's ownership structure has been the subject of controversy, its investments have yielded steady dividends. In particular Intouch’s 40.1% stake in AIS, the dominant mobile operator in Thailand, which contributes over 90% of its earnings.
Boonyachai says AIS will participate in the National Broadcasting and Telecommunications Commission's (NBTC) upcoming auction of bandwidth for the 1800-MHz spectrum in August and the 900-MHz spectrum in November. He adds that NBTC has announced terms and conditions for the bidding of 4G and it will hold a public hearing soon.
With deep pockets, Boonyachai is confident that AIS will win. "For the money mobilisation we don't have any problem. We have very good credit," Boonyachai said. "We have an AA+ rating, so [we have] no problem in mobilising the money. We are already prepared," he said. AIS' capital expenditure this year will be Bt40 billion ($1.2 billion).
The company plans to reduce its future dependence on AIS and has undertaken various projects to diversify its earnings. "Our aim is that in the next five years, contributions from others should be 25% and contribution from AIS should be 75%," Boonyachai said.
In addition to AIS, Intouch also has a 41% stake Thailand's sole satellite operator Thaicom, which was also founded by Shinawatra. The Thai stock exchange-listed Thaicom operates IPSTAR, which offers internet satellite service in remote areas including parts of China, India and the Australian outback.
In addition, Intouch is looking at different business opportunities, including a foray into digital TV. Late last year, NBTC auctioned off licenses for 24 free-to-air channels but Intouch failed to clinch a standard definition (SD) variety channel license as bidding prices spiralled up. "We have a threshold. This is the amount we think is proper for the license to make it viable," Boonyachai explained. "It went up far beyond, so we didn't take it," he said.
Intouch will also be investing in fledgling companies in telecom, media, IT and digital content and seeking out venture capital candidates.
