True Corporation

True Corporation Plc (TRUE)
 

What’s new? The Bangkok Post newspaper reported that ICT Minister, Group Capt Anudith Nakornthap, said a ministry investigation into the 3G-HSPA contracts between CAT and True Corporation had found five irregularities with the contracts.
Alleged irregularities: The investigation found that ICT Minister Juti Krairiksh instructed CAT to reduce its purchase offer price for Hutchison Telecom’s Thai assets to Bt4bn, causing Hutchison to refuse the offer and enabling TRUE to buy Hutch.
The revocation of the CDMA service contract in 25 central provinces with Hutch wasn’t approved by cabinet, so was in breach of the 1992 Private-Public Joint Venture Act.
CAT violated the ICT Ministry’s work procedures. Documents were prepared and signed in advance and paperwork, which was processed through ICT bureaucrats, carried no views from relevant state agencies before reaching the desk of the ICT Minister. Furthermore, CAT failed to consult the NESDB and the Council of State over its business deal with TRUE.
On April 28, 2011 CAT asked the ICT Ministry to scrap its CDMA investment plan and switch to a Bt12bn rental equipment agreement with TRUE. The 1992 Public-Private Joint Venture Act prohibits state agencies and state-owned enterprises from entering into transactions with private sector parties exceeding Bt1bn without cabinet approval. CAT didn’t have cabinet approval for its deal with TRUE.
Will probably go to court: The ICT Minister said that he will forward the findings of the investigation to the National Anti-Corruption Commission (NACC), which will decide whether to file the case to court (presumably the Central Administrative Court). If the case were to go to court, it’s not clear how long the judges would take to make a decision (SHIN lost its ITV concession within a couple of months of the Sept 19, 2006 coup; other cases involving state concessions or contracts have dragged on for years).
Action: This news will generate negative sentiment toward TRUE. We were skeptical about the legality of the contracts with CAT since they were signed in Jan 2011. Note also that the NBTC has a separate investigation into the deal.  Our HOLD rating stands