Shin Corp shares plunge, Thais want satellite back and Temasek looking to offload troubled acquisition

Thailand presses Temasek in satellite battle
Amy Kazmin
Financial Times

Thailand’s military-led government on Monday increased pressure on Temasek, Singapore’s investment arm, to give up control of satellites acquired during the purchase of Shin Corp, as it threatened to revoke the satellites’ operating concessions.

The warning shot appeared aimed at forcing Singapore’s Temasek Holdings into voluntarily selling Shin Corp’s 41 per cent stake in listed subsidiary Shin Satellite. Analysts said it could be the first step in unravelling Temasek’s $3.8bn acquisition of Shin, which triggered a year of political upheaval in Thailand.

Temasek last year bought Shin Corp, Thailand’s largest telecommunications company, from the family of Thaksin Shinawatra, the then Thai prime minister. The deal and allegations that his family avoided paying taxes on the proceeds drew widespread protests and led to Mr Thaksin’s overthrow last September.

“Getting [the satellites] back – that is definitely what we want to do. But the question is how,” Sittichai Pokaiudom, communications minister, said.

Bangkok could buy back the satellites, the minister said. But he also warned that the operating licences could be revoked in what analysts said appeared to be a threat designed to up the ante should Temasek decline to sell. “Shin Satellite is in play,” said Andy Chan, telecom analyst at JP Morgan.

“I think there is an intention to unravel the [Shin Corp] deal and how it gets done is the issue,” he said. “You have all these guns lined up against Temasek, and you are saying: ‘Do you want to unravel the deal? Or should we proceed with plan B?'”

Gen Sonthi Boonyarathkalin, the army chief and coup leader, has said he wants to reverse the deal to fulfil his duty to “salvage the country and its assets”. Worries that Bangkok will force Temasek into a fire sale sent Shin Corp’s Thai-listed shares falling 7.1 per cent yesterday.

Thailand has ample leverage to press Temasek to the negotiating table, with a host of pending legal cases and unresolved issues that could affect the future of Shin Corp and subsidiaries, including Advance Info Systems, Thailand’s largest mobile phone company.

Shin Sat is majority Thai-owned even with Temasek’s indirect 41 per cent holding. It has five satellites (four active) and is a small part of Shin Corp’s portfolio. Its share price is 50 per cent lower than at the start of 2006.

“It is an incredibly good leveraged buy-out opportunity,” said Richard Moe, a telecom analyst at Macquarie Securities. “The market price for the shares is extremely low – a third below book – if you value it as the sum of its parts.”

Shin Satellite is worth about $200m at market prices, with the 41 per cent owned by Temasek via Shin Corp worth about $85m. Three of its satellites are used for television broadcasting and telecommunications. Its IPStar satellite’s main markets are elsewhere in Asia. It operates growing mobile phone businesses in Cambodia and Laos.

Bangkok looking at how to buy back Shin Satellite
Business Times

Uncertainty over Shin Corp’s fate prompts investors to sell down stock, which sinks 7%

Thailand is looking at buying back its Shin Satellite company from Singapore investment company Temasek Holdings, Information & Communications Technology Minister Sitthichai Pookaiyaudom said yesterday.

‘We are looking into ways we can acquire some of the assets,’ he said. ‘If we will buy, we also need to think which assets we will buy.’

The cost of Shin Satellite alone could be 10 billion baht (S$447.4 million), he estimated. ‘Getting them back, that is definitely what we want to do. But the question is how?’

Thailand’s military leader Sonthi Boonyarataklin, who led the Sept 19 coup that toppled the government of Thaksin Shinawatra, said five days ago he wants to regain control of 140 billion baht of assets that Temasek acquired when it bought Shin Corp from the Thaksin family. He singled out Shin Satellite and mobile phone provider Advanced Info Services (AIS).

General Sonthi’s statements have won favour with the Thais. An opinion poll released on Sunday found more than 78 per cent of 1,116 people surveyed backed his bid to reclaim Thai assets from Singapore.

Mr Sitthichai said yesterday if it was found that Shin Corp is majority-controlled by foreigners, the government can opt not to extend Shin Satellite’s concession.

‘The ministry won’t renew satellite operating concessions,’ he said. ‘It also won’t allow the company to launch new orbiters.’

He also said – somewhat ambiguously – that ‘it will not be necessary to buy back Shin Satellite if it is determined to be a foreign-owned company, as its operating concession could be revoked’.

He declined to clarify this statement but indicated that a committee set up by his ministry to study Shin Satellite’s concession agreement had found ‘irregularities’ that may enable the government to withdraw the concession. Analysts say, however, that because Shin Corp’s stake in Shin Satellite is 41.3 per cent, Shin Satellite cannot be considered a foreign-held company. Shin Satellite owns five satellites including Ipstar – the world’s largest broadband commercial satellite.

Temasek has declined to comment on the satellite controversy.

Mr Sitthichai said yesterday that whatever measures are taken, they will not jeopardise the investment climate in Thailand – which has been battered by the imposition of capital controls last December, New Year’s Eve bombings and later amendments to the Foreign Business Act. He said the government would move quickly but carefully to assure ‘foreign investors and foreigners do not feel that we are against them’.

By acquiring Shin Corp, Temasek gained control of assets including AIS, Shin Satellite, Internet company CS Loxinfo, budget airline Thai AirAsia and broadcaster ITV.

The sensitive nature of some of these assets has prompted Thailand’s military to accuse Singapore of using them to eavesdrop on military phone calls – a charge Singapore has denied.

Uncertainty over the fate of Shin Corp has prompted investors to sell down the stock, which sank 7 per cent yesterday to 26 baht. This means that on paper, Temasek’s investment has dropped by almost half. Temasek is reportedly looking for buyers for Shin Satellite and iTV but has said nothing officially.

Separately, the Thai government is investigating the nationality of Kularb Kaew Co, a holding company allegedly used by Temasek as a nominee shareholder of Shin Corp to get around a 49 per cent limit on foreign ownership. ‘If it is proved to be foreign, it would be illegal and can be revoked,’ Mr Sitthichai said yesterday. ‘There are many available legal options.’

The Shin deal has led to a diplomatic rift between Thailand and Singapore, which intensified last month when Dr Thaksin made a private visit to Singapore and met Deputy Prime Minister S Jayakumar.

Singapore said the visit was personal and had nothing to do with politics. Thailand said it was ‘dissatisfied’ with this response.

Temasek may offload satellite firm: Singaporeans want to ease tensions

Komsan Tortermvasana Umesh Pandey
Bangkok Post

Temasek Holdings could look to sell Shin Corp’s holdings in Shin Satellite Plc to help ease growing tensions between Thailand and Singapore.

Gen Sonthi Boonyaratkalin, the head of the Council for National Security, said last week that he viewed the satellites as “national assets” that should be returned to Thai ownership, and has suggested that national security was compromised as critical communications could be tapped by the Singaporean government.

SATTEL operates four satellites under build-transfer-operate concessions with the government expiring in 2021. Another satellite, Thaicom 3, was taken out of commission last year.

While SATTEL insists that its foreign shareholdings remain well below the 49% limit set under the law, this largely depends on an interpretation that Shin, which holds 41.3% of the satellite operator, is also a Thai company.

Police are investigating claims that Temasek violated the Foreign Business Act and used illegal nominees after buying out the 49% shareholding in Shin from the family of former prime minister Thaksin Shinawatra last year.

Sources said Temasek may look to sell off SATTEL to reduce political pressures as the Shin inquiry moved forward.

“They have already been talking to a few potential buyers who are Thai but the issue that has come up now is that the government wants it for itself,” said a source close to the negotiations.

Another source said that Temasek was also looking to offload the broadcaster iTV as part of a plan to restructure its Thai operations and ease diplomatic pressures.

“[Temasek] has already finalised its plans. But statements that the government wants to buy back or seize the assets only complicate the process,” the source said.

“They have buyers lined up, but with such statements, these Thai buyers may opt to back out. Who would want to put money into a sinking ship?”

Sitthichai Pookaiyaudom, the Information and Communications Technology Minister, said yesterday that the ministry was awaiting the outcome of the investigation into the nominee issue, focusing on shareholding group Kularb Kaew.

“If it was proved that [Kularb Kaew] was a nominee of Temasek, then the ICT ministry would revoke the satellite concession of Shin Sat immediately, without having to resort to the buyback option,” he said.

Alternatively, the government could seek to buy out the shareholdings of either Shin Corp or Shin Satellite.

“Buying back Shin Corp would need a huge sum of 100 billion baht, but for Shin Satellite, it would take only in the range of about 10 billion baht, and either TOT Plc or CAT Telecom would be designed to buy back,” he said.

Analysts said that if Temasek was in fact looking to divest Shin Satellite, it would be positive for Shin as the satellite company contributed only 3-4% of Shin’s total revenue.

“This is good news, as one of the big problems would be resolved and we can see Shin Corp move forward,” said a local analyst.

But, he said, the outlook for Shin Satellite would worsen if it fell into the hands of a state agency or private company that lacked technological expertise.

“Look back at Mr Thaksin – he was the driving factor behind the success of Shin Satellite. Today Temasek can provide that [management expertise] with its far-reaching ventures and associations, but if it fell into government hands, who is going to manage it? Bureaucrats. That is the worst-case scenario in my view.”

Pisut Ngamvijitvong, an analyst at Bualuang Securities, said in a research note that with the political risk high on SATTEL, investors should tread carefully.

Most analysts say they expect the new buyer to buy the shares at no less than the book value of 11.70 baht each as of the end of the third quarter of 2006, although sources close to the deal say that the sale price could be very different.

Analysts have either a “hold” or “sell” rating on the shares, with DBS Vickers Securities giving it a valuation of 7.30 baht a share, whereas TSEC Securities has a fundamental value at 10.94 baht.

SATTEL shares closed yesterday on the SET at 7.10 baht, up five satang, in trade worth 42 million baht. SHIN shares closed down two baht at 26.25 in trade worth 10.1 million.

Thailand to poll nation on reclaiming satellites from Singapore


Thailand has announced it will poll the nation and allow public opinion to decide whether the government should seek to buy back the nation’s satellite operator now controlled by Singapore’s Temasek.

If more than 75 percent of those surveyed back the idea, Thailand will make an offer to buy Temasek’s shares in Shin Satellite, said the minister for information and communication technology, Sitthichai Pookaiyaudoom.

Singapore’s state-linked investment firm Temasek won control of ShinSat last year when it bought Thai telecom giant Shin Corp from the family of ousted prime minister Thaksin Shinawatra.

The politically explosive deal sparked street protests and eventually led to the bloodless coup that toppled Thaksin’s government in September.

ShinSat operates four satellites owned by the Thai government under a concession that has 10 years remaining.

Temasek holds a controlling 41 percent stake in ShinSat. Buying out Temasek’s shares would cost the Thai government about 10 billion baht (280 million dollars), Sitthichai said.

“This issue is very delicate and affects public sentiment. We have to be very careful in how we proceed,” he added.

Thailand’s National Statistical Office will have one month to conduct the poll and submit the results to the government, the minister said.

Meanwhile, the government will continue to investigate whether Temasek broke foreign ownership laws when it bought Shin Corp, Sitthichai.

The minister said Monday that if the deal were declared illegal, the government could revoke ShinSat’s concession to operate the four Thai government-owned satellites.

Thai junta leader General Sonthi Boonyaratglin on Friday described the telecom satellites as “national assets” that should revert back to Thai control.

Sonthi has previously voiced fears that Singapore would use the satellites to spy on Thailand, and has ordered military officials to give up their cell phones in favor of walkie-talkies.

Singapore has denied any spying.

The grandstanding came after a month of tension between Thailand and Singapore, sparked by a visit to the city-state by Thaksin, during which he met with a top government official.

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