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Calling time

21 February 2014 By Una Galani

Thailand’s telecom operators are relying on yield to defy the country’s political turmoil. Escalating protests and low valuations make it an odd time for a financially healthy company like Jasmine International to pursue a $1.4 billion spinoff. Though the plan to give its broadband infrastructure assets a separate listing makes financial sense, investors may need to be tempted with sweeteners.

Bangkok-listed Jasmine plans to sell its core 610,000-kilometre optical fibre cable network and 16,000 access nodes into the fund and then lease them back. The operator will retain a one-third stake in the newly listed fund. Jasmine will use the proceeds to expand its broadband business in a country where operators face minimal competition, and penetration for households was below 23 percent in 2012.

The spinoff plan follows two similar Thai infrastructure fund offerings last year. Rival telecom operator True Corp, majority owned by Thai billionaire Dhanin Chearavanont, raised $1.8 billion in December by spinning off a hodgepodge of towers and cables as part of a cash call. In April, Skytrain operator BTS Group Holdings raised $2.1 billion in Thailand’s largest initial public offering. Both have underperformed the country’s benchmark stock market index since they were listed.

Jasmine faces its own hurdles. The fund’s hoped-for market value of $2.1 billion looks punchy for assets that represent half of the group’s total book value as of June, according to a company filing. Jasmine’s own market capitalization is barely $1.7 billion following an 8.9 percent slump in the local stock market since Sept. 18, when political protests against Prime Minister Yingluck Shinawatra’s government began to gain momentum.

A healthy tax-free dividend will help. The fund will offer a yield upwards of 6.6 percent, according to a person familiar with the matter, well above the current 3.8 percent yield on 10-year government bonds. But for Asian companies seeking to monetise cash-generative assets, it’s a race against the clock. The expectation of rising interest rates dampened demand for last month’s offering of HK Electric, the utility backed by Asia’s richest man Li Ka-shing. If Jasmine wants to defy Thailand’s political paralysis, it may need to do more to stand out from the crowd.


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