Nynex' Excellent Adventure In Thailand

When companies invest in the developing world, conventional wisdom holds that they should avoid political strife. But sometimes, the conventional wisdom is plain wrong. So says Nynex Corp., which was in the midst of negotiating a 15% stake in a joint venture to build 2 million main phone lines in Thailand when a coup broke out. Violent street clashes in April, 1992, between

pro-democracy civilians and the military, forced King Bhumibol Adulyadej to rebuke the government.

"We were just reaching the final stages of negotiations, and a lot of companies were leaving the country," says Nynex Vice-Chairman Frederic V. Salerno. But executives of the Charoen Pokphand Group (CP) of Thailand, the majority partner in the venture, pointed out to the nervous New

Yorkers that their country had weathered several coups in the past two decades, and economic growth continued unabated each time. "We figured that since coups never made a difference, we weren't going to bail out," Salerno says.

WELL-HEELED. Smart move. Today, Thailand has a democratic government, and Nynex' $470 million investment in Thailand is worth $1.2 billion. Its partnership with CP, TelecomAsia, went public a year after it was formed and has a market capitalization of $8 billion, making it one of the best-heeled carriers in Asia.

Nynex' Thailand adventure is a case study in how to do things right in a developing country. The Baby Bell, looking for opportunities outside its highly regulated New York and New England calling regions, started by picking a country that met its international investment criteria--strong economic growth and a driving need for telephone infrastructure. In 1992, Thailand's gross domestic product was growing by 10% a year, but it had only 3 phone lines per 100 people. The government wants 10 per 100 by the turn of the century. It awarded a license to TelecomAsia to build 2 million lines, operate them for 25 years, and then transfer the whole thing back to the government.

CP, an industrial conglomerate with no telecom experience, needed a partner that could handle a project that size. It had been negotiating with British Telecommunications PLC, but BT refused to take an equity stake. Nynex was chosen, a CP official says, in part because of its presence in the world's most complex phone market. Once you've run New York's network, their thinking went, Bangkok would be a piece of cake.

Then came the hardest part: doing the deal. "The subtleties were in the translations," says Salerno. "The lawyers always seemed to be writing up something different than what we had said." So Nynex and CP had the lawyers write each point down as they agreed to it, so that there wouldn't be any confusion later.

For Nynex, its biggest negotiating point was to maintain operating control, despite its minority share. "We never blinked on that," says Salerno. It also won a fight with CP over the right to appoint the chief operating officer. "We told them that the reason we're here is because you want our expertise, so let us use it," he says.

CP has no regrets. It's ahead of schedule on the buildup, and TelecomAsia recently won the license to build Thailand's first cable-TV network. But CP is most pleased with the relationship it has built with Nynex executives. "All along, Nynex has sent us their best people," says CP President Sunthorn Arunanondchai, on a recent trip to New York. "When we come here, they take us into their homes. Even though it is a 30-hour flight to Bangkok, Mr. Salerno always comes to our meetings." That kind of personal attention has paid off for Nynex. CP has taken it as a partner in China, where the Thai group is already well established. "We consider ourselves bound at the hip," says Salerno. "The Thais have become like our family."

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