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February 2, 2007 12:16 am

TAC pins hopes on rural Thai expansion

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Total Access Communications, Thailand’s second-largest mobile phone operator, said it intends to spend Bt30bn ($853m) to expand its network in rural areas over the next three years, in spite of political and economic uncertainties.

“We strongly believe in the strength of the Thai economy and that is the reason we will invest heavily,” Sigve Brekke, TAC’s chief executive, said on Thursday. Analysts said TAC appeared to be trying to reassure its approximately 11.5m mobile phone subscribers that it would continue to grow, despite a high-profile investigation into the legality of its current shareholding structure.

“Part of it is marketing – to give confidence to their customers that they are continuing to invest in their network and will improve the quality of their service,” said Keith Neruda, head of research at UBS.

TAC is effectively controlled by Norway’s Telenor, despite a Thai law that limits foreign ownership of telecommunications companies to 49 per cent.

Telenor – previously a minority shareholder in the venture – acquired full control of the Thai operator in October 2005 using a complex multi-level shareholding structure later replicated by Singapore’s Temasek Holdings for its highly controversial takeover of Shin Corp, the telecoms empire founded by Thaksin Shinawatra, the ousted prime minister.

Both deals took advantage of Thailand’s ambiguous foreign investment laws, which have long allowed foreign companies to have effective control over companies through stronger voting rights, as long as Thai citizens held a majority of the equity.

But while Telenor’s take-over of TAC attracted little attention from the Thai public, the Shin deal provoked a massive public outcry amid allegations that a strategic national asset had been sold to foreigners.

Thailand’s current government, installed after the military ousted Mr Thaksin in a bloodless September coup, is tightening foreign investment laws, which analysts say could force some foreign investors to reduce their holdings in their Thai operations.

The Commerce Ministry is also investigating around a dozen firms – including Telenor’s local subsidiary – to determine whether their current shareholding structures violate investment laws.

While Mr Neruda said he did not expect that Telenor would have to reduce its TAC holdings, he said that any potential restructuring of the shareholding structure should not affect TAC’s prospects in the still-growing mobile phone market.

“What happens to the shareholding level shouldn’t affect how the company’s business is carried out,” he said. Of the investment plan, he said, “it’s a sound decision. It reflects that there are still plenty of growth opportunities in the mobile sector.”

TAC’s investment plan in fact represents a slight slowdown from its aggressive network expansion over the last two years, when Thailand’s number of mobile phone minutes tripled.

TAC also said that part of its planned investment was contingent upon its receipt of a 3G licence.

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