True puts rights issue on ice as Jasmine awaits funding

Thai number three True is planning on funding its newly acquired 4G licences with a THB85 billion ($2.37 billion) rights issue.

Having won two licences at auction towards the end of 2015 for THB116 billion ($3.22 billion), True is now looking to recapitalise by writing down the prices of its shares to 90% of the average – valuing them at around THB5.70 ($0.16) per share - between 3rd and 30th of March. This could generate as much as THB85 billion ($2.37 billion).

However, True will likely stall this plan based on the actions of its rival mobile operator, the newcomer Jasmine International. Both operators acquired a 10MHz block of 900MHz spectrum with a bid of around THB76 billion ($2.1 billion), and are up against a 21st March deadline to pay off the reserve prices for these holdings. If Jasmine cannot obtain bank financing in order to do this, True is liable to delay its payment – and therefore its rights issue – to renegotiate the cost of the spectrum.

By 21st March, True has to pay 50% of the reserve price as well as deliver bank guarantees to cover the remaining costs, which under the current terms must be paid off across three instalments by 2017. Jasmine has to pay off around THB8 billion by this date, but the astronomical cost of spectrum in the Thai market seems to have shaken confidence among foreign investors, with Jasmine’s unnamed South Korean partner pulling out of the deal.

While True’s board has green lit the issue of 15 billion share rights – roughly 61% of the operator’s shares – this requires shareholder approval by 8th April if it is to go ahead. If it does then China Mobile would be a likely participant, having allied itself strategically with True in September 2014 via a private share placement. The THB28.6 billion ($880 million) deal gave the Chinese market leader an 18% holding in True.

Thai regulator NBTC (National Broadcasting and Telecommunication Commission) is currently creating a contingency plan and possible new auction in case neither of the 900MHz winners is able to pay off their licence fees. If both operators miss the deadline they stand to lose their down payments, which were 5% of the reserve prices.

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