Advanced Info Service's (AIS) plan to acquire fixed broadband provider Triple T Broadband (TTTBB) and invest 19% in Jasmine Broadband Internet Infrastructure Fund (JASIF) is now shrouded in uncertainty after JASIF unitholders rejected AIS's proposed amendments to optical fibre cable (OFC) rental agreements between TTTBB and JASIF.
The market is watching AIS's response to the resolution, following a meeting of JASIF's unitholders on Tuesday.
AIS announced in July its plan to acquire TTTBB and buy a 19% stake in JASIF -- both from Jasmine International Plc (JAS) -- in a deal worth 32.4 billion baht in total. The deal would be completed by Advanced Wireless Network (AWN), a subsidiary of AIS.
JASIF owns OFCs spanning 1.6 million core kilometres, which are currently leased by TTTBB for its broadband internet service under the 3BB brand.
The meeting of JASIF unitholders on Tuesday was held to establish resolutions regarding the deal with 1,093 unitholders in attendance in person or by proxy.
Three key agenda items were put forward for unitholders to consider before making a decision. To approve each item on the agenda, support was required from unitholders representing at least 75% of the total number of investment units.
Some 82.9% voted in favour of the first agenda item, which involves a switch of JASIF's sponsor from JAS to AIS, the sale of JAS's investment units in JASIF to AWN, as well as the removal of a non-competition provision.
For the second agenda item, the 75% approval threshold was not met as only 69.1% voted in favour. This item concerns amendments to the OFC rental agreements.
For the proposed amendments, AIS wants JASIF to extend the main lease agreement, which involves 80% of JASIF's OFCs, from Jan 29, 2032 to Dec 31, 2037. However, the carrier wants to terminate the rental assurance agreement, which concerns the other 20% of JASIF's OFCs.
Additionally, AIS supports TTTBB paying an advance rental of 3 billion baht to JASIF via three instalment payments of 1 billion baht each.
Some 78.9% voted for the third agenda item, which includes an amendment to certain provisions of the undertaking agreement and the termination of the escrow account agreement.
BACK TO AIS
AIS chief executive Somchai Lertsutiwong said the amendments were proposed in line with business realities and the current environment for fixed broadband services.
"The existing contracts' conditions don't fit in with operations," said Mr Somchai.
The results from the JASIF unitholders' meeting are going to be forwarded to AIS's board for consideration.
Pisut Ngamvijitvong, senior equity research analyst at Kasikorn Securities (KS), said the next critical step is how AIS's board will view the deal under the current conditions.
The board is likely to make a decision within a week, he said.
"As JASIF unitholders have delivered a strong message about the deal, the possibility of a renegotiation is low," Mr Pisut said.
DTAC-TRUE INFLUENCE
AIS is likely to scrap the deal now that the termination of the rental assurance agreement was rejected by JASIF's unitholders, he said.
However, KS believes AIS should continue to proceed with its acquisition even without a discount in the rental payment, said Mr Pisut.
KS believes the progress of the merger of its key rivals True Corporation and Total Access Communication (DTAC) could be a driving factor for AIS to pursue the deal.
"If AIS decides to walk away from the deal, it may lose its competitive position if the merger of DTAC and True takes place," he said.
Recovering dividend expectations could help boost the unit price, Mr Pisut said.
However the chance of renewing the lease options or an asset injection taking place now by either JAS or AIS are low, he said.
If the company presses ahead with the deal without a rental discount, its earnings and dividend could be affected in the next few years, said Mr Pisut.
