Advanced Info Service (AIS) is flexing its muscles in the fixed-line broadband sector as the country's largest mobile operator strives to shift to higher margin businesses.
The development followed its recent acquisition of CS LoxInfo Plc, an internet affiliate of the InTouch Holdings -- AIS's parent firm.
The deal, part of the group's internal restructuring efforts, will allow AIS to inherit the internet firm's management team, as well as consolidate CSL as a sales unit of AIS once the deal is settled, said a source familiar with the matter.
An industry analyst said AIS would find synergy by integrating CSL's operating fixed assets, client base and technical expertise with its fixed mobile convergence strategy.
More importantly, CSL will most likely delist itself from the SET once the acquisition goes through.
According to a recent report of AIS to the SET on Sept 13, AIS is performing due diligence to acquire shares of CSL from two major shareholders: Thaicom Plc, which holds 42.1% of CSL through its subsidiary, DTV Service Co; and Singapore Telecommunication Limited, which holds a 14.1% stake in CSL.
The deal's preliminary indicative price is 7.8 baht per share, but this figure is subject to further negotiation and/or due diligence.
AIS expects its due diligence exercises to be completed by mid-October.
A source close to the deal said AIS needs total control of CSL's business, assets and client base in order to complement AIS's client portfolio. The consolidation will further serve AIS's efforts to increase the number of new services (like cloud computing) it provides to clients.
If AIS acquires most shares of CSL as planned, CSL will be merged into AIS's organisational structure, and will have to be delisted from the SET.
"The deal is in line with AIS's strategic plan, which will focus on three aspects: enhancing its mobile and fixed networks infrastructure; providing more digital services -- including more categories of digital video entertainment; and collaborating with the government to provide mobile applications under the 'Digital for Thais' initiative," the source said.
This year, AIS aims to invest 45 billion baht to maintain its leading market position. Of that investment, 10% will be earmarked for fixed-line broadband networks and the rest for digital infrastructure -- including wireless networks and digital platforms.
CSL is a small-cap telecom solutions provider with expertise in the enterprise segment. Its 180-day average share price is 6 baht. CSL has 594.5 million common shares and reported a net profit of 154.3 million baht in the first half, an analyst at CIMB said.
AIS's fixed-mobile convergence strategy, in conjunction with CSL's assets, has the potential to create greater synergies than Thaicom-CSL would. Thaicom's sale of CSL may unlock the hidden value of the firm, the analyst said.
Six trading days prior to the announcement of the deal, CSL's share price surged by 25% to 7.5 baht.
Meanwhile, Thaicom's share price jumped 3.4% to 17.2 baht on Sept 13.
"CSL's and Thaicom's irregular trading patterns on the back of the deal announcement this evening are disappointing. But there have not been irregular trading patterns for AIS and InTouch thus far," the analyst said.
