Thai conglomerate Charoen Pokphand and Norway’s Telenor will merge their telecommunications units in the Southeast Asian country in a deal that will create the kingdom’s dominant supplier worth more than $ 8.6 billion.
CP, Thailand’s largest conglomerate, has a meaningful presence in agriculture, food and retail – where it had a competitive edge for its $ 10.6 billion takeover of Tesco stores in Thailand and Malaysia last year.
The proposed link between Telenor’s Dtac unit and CP’s True Corporation comes as telecommunications groups across Southeast Asia join forces to run 5G infrastructure and cover the high cost of investing in new technologies such as artificial intelligence and cloud services.
“Profit margins used to be higher than that, and expanding 5G and bandwidth will require heavy investment,” said Pisut Ngamvijitvong, an equity analyst at Kasikorn Securities in Bangkok.
The agreement is the latest in regional telecommunications after Telenor and Malaysia’s Axiata in June merged their mobile operations in the Southeast Asian country in a $ 15 billion deal. In Indonesia, Ooredoo and CK Hutchison in September agreed a merger of $ 6 billion.
CP and Telenor said if the transaction continues, a voluntary tender offer will be made for all outstanding shares of Dtac and True at a premium of 25 percent on their respective share prices.
CP said the two companies plan to create a new business that will be “a technology company rather than just a telecommunications company”. True and Dtac businesses will be part of this new entity.
“We hope this initiative can be a major force in helping Thailand become a technological hub in the region,” the company said.
Jorgen Rostrup, head of Telenor Asia, said the new company aims to raise venture capital funding with partners worth $ 100 million- $ 200 million to invest in digital start-ups focusing on new products and services for Thai consumers.
True and Dtac between them will have more than 51 million post- and prepaid users or more than half of the total market in Thailand, a country of 70 million people where competitor AIS counts more than 43 million users.
Analysts said the proposed merger is likely to prompt a regulatory review by the Office of the National Broadcasting and Telecommunications Commission.
“Because it is such a significant merger, there is going to be a huge impact on competition and consumers,” said Sarinee Achavanuntakul, an economist and researcher on corporate governance and sustainability. “The NBTC must be active and say they will invoke their regulatory powers.”
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