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2 ASIA HAND Dismantling
Thailand's Shin Corp By Shawn
W Crispin
BANGKOK - With this week's
takeover of iTV, Thailand's new military rulers
have made their first move toward dismantling the
telecommunication and media empires that once
provided the behind-the-scenes financial firepower
for ousted prime minister Thaksin Shinawatra's
once powerful, now diminished, political
juggernaut.
iTV represented a small part
of the Shin Corp's corporate
expanse, which currently
includes major holdings in telecoms, satellites,
aviation, property development, consumer finance
and the Internet. Its mobile telecoms subsidiary,
Advanced Info Services (AIS), provides the lion's
share of the conglomerate's profits and catapulted
Thaksin to billionaire status before he divested
his shares to family members when he took up the
premiership in 2001.
The company's profits
soared during Thaksin's political tenure, padded
by his government's policies aimed at pumping up
domestic consumption through aggressive state-bank
lending and assorted cheap-credit schemes. With
Shin Corp's share price near a record high, and
popular political pressure mounting against
Thaksin, in January 2006 his family sold the
company to Singapore's state-run Temasek Holdings
in a controversial US$1.9 billion transaction.
The company has been under political
assault ever since the military seized power from
Thaksin in a bloodless putsch last September. A
Thai court last year ruled that iTV had breached
the terms of its original 1995
build-transfer-operate concession with the Prime
Minister's Office and imposed more than $2.2
billion in fines, fees and owed interest payments.
The station failed to meet a recent payment
deadline and the military junta rescinded its
operating concession and is in the process of
determining which assets it can legally repossess.
To some market watchers, the highly
anticipated move represents a form of forced
nationalization of a foreign-held asset. Shin
Corp's shares fell 2.6% the day after iTV's
closure and so far Temasek has remained mum about
the losses it will incur because of the station's
demise. In part, that's because iTV was the only
perennial loss-maker among the Shin Corp's
otherwise profitable stable of companies.
But iTV's nationalization likely
represents the first of a series of controversial
moves to dismantle and then redistribute to
politically preferred players the Shin Corp's
various communications assets operated under state
concessions. Coup leader General Sonthi
Boonyaratklin has in recent weeks stated the
junta's intention for national-security interests
to seize three communications satellites that
Temasek now majority-owns through Shin Corp
subsidiary Shin Satellite.
The potentially
bigger blow will come if and when the junta
follows through on its apparent plans to rescind
AIS's operating concession. Pridiyathorn Devakula,
the interim military government's finance minister
and deputy prime minister for economic affairs
until last week, in January told a private meeting
of foreign analysts gathered to discuss amendments
to the Foreign Business Act that it was "only a
matter of time" before they rescinded AIS's
build-operate-transfer concession, according to an
analyst who was in attendance and who spoke to
Asia Times Online on condition of anonymity.
The Council of State is now reviewing
legal matters surrounding a possible concession
rescission, which reportedly could be justified by
alleged irregularities in the manner in which AIS
received its concession from the state-owned
Telephone Organization of Thailand (TOT) back in
1992. If so, it's unclear whether the council's
legal interpretation would allow for the
government to make retroactive demands - as it did
in the iTV case - that would require AIS to pay
the state potentially billions of dollars' worth
of penalties on previous profits and revenues.
Money in the bank Those
penalties could potentially be seized from the
$1.9 billion the Shinawatra family received in the
Temasek transaction and now reportedly holds in
interest-bearing accounts at Siam Commercial Bank,
which is controlled by the royal family's Crown
Property Bureau. Arguably, financial markets have
not fully priced this risk into the Shin Corp's
share price, which has fallen from 31 baht per
share on the day of last year's coup to 24.6 at
Thursday's close of trading.
Large foreign
hedge funds, including the United States' Farallon
Capital, at least into February held AIS's liquid
shares in some of their emerging-markets
portfolios. Fitch Ratings recently placed AIS on a
rating negative watch because of what it referred
to as "heightening policy, regulatory, and legal
risks that could substantially affect the major
telecom operators in Thailand" and that "rising
policy uncertainties may lead to a review of
concessions".
HSBC has recently warned its
clients about the possibility of a nationalization
of Shin Satellite's assets, but one of its senior
analysts who spoke on condition of anonymity to
Asia Times Online said that its telecommunications
department had not yet issued a similar downgrade
warning on AIS because of a lack of evidence about
the government's plans. Shin Corp chief executive
officer Boonklee Plangsiri failed to reply to
e-mailed questions from Asia Times Online about
reports that AIS is poised to lose its operating
concession.
Certain hedge-fund managers
and investment bankers who have recently visited
Thailand and met with Asia Times Online have
universally asserted that if the government moves
on AIS on perceived flimsy legal grounds it will
further undermine broad
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