China Mobile Ltd., the world’s largest mobile-phone company by subscribers, agreed to buy an 18 percent stake in Thailand’s True Corp. for 28.6 billion baht ($880 million).
True, the Thai phone company backed by billionaire Dhanin Chearavanont, also plans to raise about $1.1 billion through a rights issue, the Bangkok-based carrier and China Mobile said in separate stock exchange filings. The 5.65 billion shares offered to existing True shareholders will be priced at 6.45 baht apiece, or 13 percent less than the 7.45 baht when trading was halted pending the announcement yesterday.
Thailand’s third-largest mobile-phone company is seeking to raise funds to cut debt and fund the rollout of a faster fourth-generation network to help meet surging demand for mobile data. The offering comes after the Thai army seized power last month to end six months of political stalemate between Yingluck Shinawatra’s government and its opponents.
“The company’s huge debt and interest costs have been a hangover on its business and operation,” Rutsada Tweesaengsakulthai, an analyst at Phillip Securities (Thailand) Pcl, said by phone. “The company also needs new capital in preparation for the new telecom licenses that will be opened for bidding in the next few months.”
True shares advanced 2.8 percent before the halt, giving it a market value of about $3.3 billion. The Thai carrier will offer existing investors 1 new share for every 2.5725 held.
China Mobile’s state-owned parent first expanded outside its home market by acquiring control of Millicom International Cellular SA’s Pakistan unit in 2007 for $284 million. China Mobile last year scrapped an agreement to buy a stake in Taiwan’s Far EasTone Telecommunications Co. after the island wouldn’t ease curbs on mainland ownership.
“They do have some track record of expanding overseas, and we expect they will explore more opportunities outside of China,” Ricky Lai, a Hong Kong-based analyst at Guotai Junan Securities, said by phone. “Their strategy is to explore emerging markets, as that should help growth as they are about to suffer a year-on-year profit decline.”
Dhanin’s Charoen Pokphand Group owns 34 percent of True, according to data compiled by Bloomberg. Dhanin has a net worth of $4 billion, according to the Bloomberg Billionaires Index.
Moody’s Investors Service in March downgraded True debt ratings to Caa1 from B3 with a negative outlook citing a “vulnerable business and financial profile.” The company’s debt will probably increase to more than 100 billion baht by the end of 2014 because of continued negative free cash flow, Moody’s said in a March 6 statement.
“This will be a turnaround story for True,” Chief Executive Officer Suphachai Chearavanont said on a conference call with analysts on the proposed investment by the China Mobile unit China Mobile International Holdings Ltd. “It is the right combination.”