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Buy only satellite business: brokers
Buy only satellite business: brokers
By The Nation
Published on June 16, 2010

If the government wishes to protect national security, it should buy out only Thaicom's satellite business rather than the entire company, due to the lower cost and the shorter time involved, Kiatnakin Securities said yesterday in a report.

In its research, Kiatnakin highlighted two scenarios if the government wants to take control of the satellites.

First, it can take over the satellite business alone, which would cost only Bt5.4 billion. In this scenario, the government could assume control over the satellites, while Thaicom would be cleared from all pending legal disputes related to it.

Second, if the government takes control of Thaicom, it will automatically be responsible for the telephone business in Cambodia and Laos, as well as other businesses. This would entail a higher investment. Based on a share price of Bt7.05, the market cap is Bt7.73 billion. In early 2006, when Temasek took over Shin Corp, Thaicom's market cap was Bt14 billion.

Finance Minister Korn Chatikavanij yesterday insisted the government intended to buy only the satellite business.

Yesterday, Thaicom saw a continued increase in its share price, to Bt7.20 on turnover of Bt1.3 billion.

Thaicom and Shin both stated they had not yet been approached by the government for the proposed buyback, but the Stock Exchange of Thailand urged all shareholders to thoroughly understand the investment, given the sketchy details.

Trinity Securities also highlighted the two scenarios listed above.

In the first one, the book value of the satellite business is Bt10.70 a share, or Bt11.69 billion taking into account iPSTAR's losses. Thus, the purchase price could be below book value and in this case is calculated at Bt5.85 billion.

In the second scenario, Thaicom's book value is Bt14 a share, or Bt14 billion. If the book value of the satellite business is lowered 50 per cent to reflect iPSTAR's losses, fair value would be Bt8.63 a share. In this case, if the government took over Thaicom's 41-per-cent stake from Shin, it would cost Bt3.87 billion.

Trinity said though many state enterprises stand to benefit from the takeover, CAT Telcom should be the best suitor, thanks to its international communications business as well as the satellite links. Thaicom will strengthen CAT Telcom's business and reduce its dependence on concession fees from DTAC, True Move, for instance.

"Yet, risk factors persist, be they the lack of clarity whether the government will buy the satellites or Thaicom's shares, dispute over the launch of Thaicom 4 satellite, and others; as well as social resistance over the purchase," it noted.

Asia Plus Securities wrote that MCOT or CAT Telcom could be used to buy Thaicom, or the government could establish Thaicom Fund, raising funds from the public, to buy the company.

"It should take a long time for the feasibility study, and negotiation with Temasek. Thaicom is suffering from loss as iPSTAR is not yet reaching its breakeven point. Meanwhile, Thaicom needs to define if iPSTAR is the backup or main satellite of Thaicom 5, as it serves the international internet market, which is against the concession," Asia Plus said.

Bualuang Securities noted that "If the deal is successful, Thaicom would become a state enterprise and the government would find it easier to regulate satellite broadcasting. Still, it's not clear if the takeover would involve a tender offer for Thaicom shares, but we expect that would be the case."

One analyst who asked not to be named noted that the ownership and operational management of Satellite and Thaicom has been an ongoing issue since Sept 19, 2006 coup. Temasek has good reason to sell. As a Singapore state-controlled investment firm, its ownership of Thaicom has proved an irritant to bilateral relations. The final issue is going to be pricing, he said.
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