China Mobile and True Corporation have officially signed a strategic partnership agreement in Bangkok paving the way for 4G technology transfer, joint procurement of handsets and networks and bringing the fight to OTT operators.
China Mobile had taken an 18% stake in True worth $880 million (28.6 billion baht) which along with a public share offering allowed the debt-ridden Thai telco to recapitalise.
Of the $2 billion cash injection, $1.6 billion (55 billion Baht) was used to repay bank debt, making True debt-free in terms of short-term debt, excluding long-term bonds.
This will save the company debt interest of over $124 million (4 billion Baht) a year, reduce the debt to EBITDA ratio from over 5:1 to 1.5:1 and bring the company’s shares back to investment grade.
China Mobile gains two seats on True’s board of directors and can nominate a third independent director. This will swell the current 15-seat board to 18 seats.
The two companies have set up a strategic committee with both companies’ CEOs as co-chairs and an executive committee chaired by China Mobile E-VP Li Zhengmao and True COO Vichao Rakphongphairoj.
Six working groups will be established around each of the six areas of cooperation in the strategic agreement: (1) service, value-added service, content and applications; (2) international business; (3) network development and technology; (4) device procurement; (5) network procurement and (6) personnel collaboration.
True Group President and CEO Suphachai Chearavanont said that now that True has sorted out its financial base, the company is ready and will focus on delivering convergence, network quality and the latest technology.
“We will have to keep costs in check and increase productivity and create value out of this partnership,” he said.
Supachai said that True will post a profit in Q4 this year and will remain profitable now that the “accelerated 2G loss accounting” for the 2G concession is ending in September.
Suphachai said that True was now the little brother and looked forward to working with China Mobile as its big brother going forward.