True-DTAC to merge, plans validated by respective boards

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Norway’s Telenor (TEL.OL) and Thailand’s Charoen Pokphand Group (CP Group) are actively exploring a merger of their telecom subsidiaries which would upset the current market leaderboard with a new number one company emerging.

If completed, the deal would merge the telecom operations of Telenor’s Total Access Communication (Dtac) (DTAC.BK) and CP Group’s True Corporation (True) (TRUE.BK), Oslo-based Telenor said in a statement on Friday.

This developing situation has to potential to render AIS in second place as it would be surpassed with its 43.7 million subscribers, potentially being in second place to the combination of TRUES 32 million plus DTAC’s 19.3 million subscribers.  This merger will have the potential to substantially change the marketplace, reducing competition and creating significant economies of scale for the newly merged company.

The plans have been presented to the National Broadcasting and Telecommunications Commission is calling on the companies to discuss the business plans which would likely change the telecom industry and dominate the market.

The Bangklok Post reported that Sakon Varunyuwatana, chairperson of the Trade Competition Commission, said the merger is bound to create a company with market dominance, but Section 4 of the Trade Competition Act 2560 stipulates that this Act shall not apply to acts of a business regulated by specific law in respect of trade competition.

According to the relevant government act, market dominance occurs when an entity has a market share of more than 50%, which if approved, would give the new company a market share in Thailand of around 52%.  The commission is seeking to discuss this this merger deal  further in its meeting on Thursday.

But according to Telenor and CP, it is not yet a done deal, “There are open issues outstanding and there is no certainty that the discussions will result in a final agreement. Telenor will not provide any further comments at this stage of the process,” the Norwegian company said.  

On Friday The Board of Directors of TRUE resolved to approve for the Company to explore the feasibility of, and carry out required steps to implement, the potential amalgamation between the Company and Total Access Communication Public Company Limited (“dtac”).

Furthermore, the Company has considered to fix the swap ratio in respect of the allocation of shares in a new company to be formed as a result of the Amalgamation (the “New Company”) to the shareholders of the Company and dtac, the ratios of which are: 1 existing share in the Company to 2.40072 shares in the New Company; and 1 existing share in dtac to 24.53775 shares in the New Company.

The combined entity would seek to raise capital of US$100 to US$299 million to invest in promising digital startups focusing on new products and services

A deal, if approved by regulators, would give the combined entity a market share in Thailand of around 52%, surpassing current number one AIS which holds around 44% of the market, according to Mads Rosendal, a credit analyst at Danske Bank.

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