Shin deal drives Temasek losses

October 12, 2006
Singapore Democrats

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Nuntawun Polkuamdee
Bangkok Post
12 Oct 06

Firms in Shin Corp, including iTV and AIS, suffer drop in shares

Singapore’s Temasek Holdings has suffered a paper loss of 41% since it acquired telecom giant Shin Corp earlier this year.

Shares of Shin Corp on the SET fell 0.85% in thin trade on Friday to close at 29 baht, well off the 49.25 baht per share paid by Temasek in its acquisition in January.

Other firms in the Shin group also lost ground, with TV broadcaster iTV dropping 2.82% to 2.76 baht, mobile operator Advanced Info Service off 2.29% to 85.5 baht and Shin Satellite down 2.08% to 7.05 baht on Friday.

Investors have sold off stocks related to the deposed prime minister Thaksin Shinawatra since the Sept 19 coup and the announcement that an asset scrutiny committee would examine the legitimacy of the Temasek deal.

The decision by the Supreme Administrative Court last Thursday to accept a petition charging state agencies with negligence in allowing Shin and its associated companies to maintain their state concessions following the sale further dampened sentiment over the group.

Analysts have recommended that investors avoid Shin, AIS and other related stocks.

A police investigation into the status of Kularb Kaew, a company set up by Temasek to manage its shareholdings in Shin, and whether the 49% foreign limit was violated could result in severe fines, jail sentences and/or corporate dissolution if it is found that the Foreign Business Act was violated.

Temasek holds 44% of Shin directly through Aspen Holdings, with another 52% of Shin controlled by Cedar Holdings.

Cedar in turn is majority controlled by Kularb Kaew, with Temasek and Siam Commercial Bank holding minority stakes.

Temasek has insisted that Cedar itself is a Thai company, as Kularb Kaew is 68% owned by Thai businessman Surin Uptakoon.

But Phillip Securities, in a research note, said if Kularb Kaew was deemed a nominee for Temasek, it would mean Shin as well as AIS were both in violation of the foreign- shareholding limit.

While AIS will likely be able to continue existing operations, as its concession with TOT Corp does not stipulate directly any prohibitions against foreign ownership, the future business of the country’s largest mobile operator could be affected.

The National Telecommunications Commission has already ruled that future licensees must be a Thai company. Next-generation cellular licences are expected to be auctioned by the NTC next year.

In terms of satellite operator Shin Satellite, a ruling against Shin would not necessarily affect the company, as Shin’s stake at 41.34% remained under the 49% limit, a Phillip Securities source said.

iTV however, would face a problem, as the broadcaster is 52.9% controlled by Shin. The company is already facing a major court battle over its efforts to change its programming content and reduce its concession-fee payments to the government.

“The current Foreign Business Act has many weaknesses that do not reflect business realities. The Commerce Ministry has recommended in the past that reforms are needed, but this will depend on the new minister,” said the source.