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Sources: China Mobile set to buy stake in Thailand's True Corp

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[June 09, 2014]  By Khettiya Jittapong

BANGKOK (Reuters) - State-owned China Mobile Ltd is poised to buy an 18 percent stake in Thai telecoms group True Corp valued at around $581 million, people familiar with the matter said, in Thailand's first major corporate deal since a coup last month.

True Corp, backed by billionaire Dhanin Chearavanont's Charoen Pokphand Group, also plans to offer new shares via a rights issue on the basis of seven new shares for 10 existing shares, one of the sources said.

The deal is part of the Thai group's long-term plan to secure a foreign partner, sources familiar with the matter told Reuters, and underscores Dhanin's strong political connections in mainland China, the people added.

In 2013, Dhanin's CP Group emerged as a surprise buyer for HSBC plc'c $9.4 billion stake in Ping An Insurance Group Co of China Ltd. CP Group was the first multinational to invest in China's agri-business in 1979 and it was tasked with helping to modernize China's farm sector. It also operates Lotus super markets in Shanghai, according to the company's website.

True Corp and China Mobile declined comment.

The proposed deal comes in the midst of political turmoil in Thailand, which saw the imposition of military rule in May. The crisis has weighed on corporate deal making, with volumes slumping 72 percent from a year ago to $648 million by end May, according to Thomson Reuters data.

"The deal is unusual given the country is having a political situation like this, " said Mintra Ratayapas, an analyst at KK Trade Securities,

"Some foreign investors voice concerns about the situation in Thailand. But for True, it seems like the buyer is confident about the company thanks to strong connections with Dhanin."

STRUGGLING AT HOME

True has been grappling with a rising debt burden as it invests in the expansion of its mobile networks to compete with market leader Advanced Info Service and second-ranked Total Access Communication.

True is the only Thailand mobile company without a foreign partner and the new investment is expected to help the company with its planned regional expansion, a source with knowledge of the deal said on Monday.

The plans are subject to True Corp's board approval, one of the sources said. True shares were suspended earlier on Monday pending an announcement.

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Like True, China Mobile been struggling in its domestic market. In April, the world's biggest carrier by subscribers booked its lowest quarterly profit in five years, as it faced a range of headwinds in its home market.

China Mobile, which had $69.4 billion in cash and short-term investments at the end of 2013, is fighting a multi-front battle, as China's government trials new value-added taxes which will eat into its profits and reduced connection fees China Mobile charges for other carriers to use its networks.

If successful, the deal would mark China Mobile's first transaction outside of China, Hong Kong and Taiwan in seven years, according to Thomson Reuters data.

China Mobile also faces challengers in the shape of newly-licensed mobile virtual network operators, who lease network capacity from carriers like China Mobile and sell their own packages to subscribers.

China Mobile is being advised by CICC, while Deutsche Bank is advising True Corp, one of the sources said.

(Additional reporting by Manunphattr Dhanananphorn in BANGKOK, Saeed Azhar in SINGAPORE and Paul Carsten in BEIJING; Writing by Denny Thomas; Editing by Alan Raybould and Jeremy Laurence)

[ 2014 Thomson Reuters. All rights reserved.]

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