AIS 3BB acquisition may face strict measures due to market share

The potential acquisition of fixed broadband provider 3BB by Advanced Info Service (AIS) may face stringent consumer measures from the telecom regulator due to the combined market share of the two companies. True Corporation, a rival company, reported having 3.84 million household subscribers in the first quarter of this year, accounting for 31.5% of the fixed broadband market share, according to Pisut Ngamvijitvong, a senior equity research analyst at Kasikorn Securities (KS).

True changed its guidelines for calculating its fixed broadband customer base in the fourth quarter of 2022, Bangkok Post reported. The company reported its total fixed broadband subscriber base in the third quarter was 4.9 million, which decreased to 3.82 million in the fourth quarter and then increased to 3.84 million by March this year.

True removed corporate subscribers from its customer base and adjusted the calculation to a new standard after merging with Total Access Communication (DTAC). The KS analysis indicates that the National Broadcasting and Telecommunications Commission (NBTC) may enforce stringent consumer measures in the takeover deal if the combined market share is considered “significant market power”.

On July 2 last year, AIS’s board approved the acquisition of 3BB and a 19% holding in Jasmine Broadband Internet Infrastructure Fund (JASIF), proposing the deal to the NBTC for consideration during November and December 2022. The NBTC appointed subcommittees on May 4 to evaluate the deal and provide an opinion to the board. After the merger of True and DTAC, the NBTC waited six months after appointing the subcommittees to vote on the proposal.

Recently, the NBTC board approved in principle guidelines for the takeover and investment in JASIF. Triple T Broadband (TTTBB) owns 3BB. The guidelines were proposed by NBTC management. The NBTC office was assigned to appoint four sub-committees to verify the details and conditions of the deal.

Pisut believes the NBTC will approve AIS’s takeover proposals in September, not late June as AIS executives previously predicted. AIS remains committed to acquiring 3BB and investing in JASIF, even though JASIF shareholders rejected AIS’s proposed amendments to optical fibre cable (OFC) rental agreements between TTTBB and JASIF.

The AIS board passed a resolution for its management to proceed with the acquisitions of 3BB shares and JASIF units. Despite a condition that the deal was subject to approval from JASIF unitholders to cancel the rental assurance agreement and amend the main lease agreement, the AIS board said the transaction was in its long-term interests.

At an extraordinary general meeting (EGM), JASIF unitholders passed a resolution to reject amendments to the OFC lease agreement proposed by AIS. Regarding a reduced lease fee, which was not approved by JASIF unitholders, AIS said it sees long-term benefits to the synergy between the business operations of the companies.

3BB is an established provider of home internet, while AIS is the leader in mobile telecoms and digital services. The acquisition should enable a significant reduction in redundant fibre-optic cabling.

Pisut said AIS and JASIF may have to renegotiate the OFC lease agreement in the near future as the risk of 3BB defaulting on its monthly rental payment to JASIF has increased, given that the company breached its financial covenants. He said KS is increasingly concerned about 3BB’s liquidity as it missed its monthly rental fee to JASIF for three consecutive months. Pisut said this issue makes an OFC lease renegotiation likely before the next EGM.

Gulf Energy Development became the second-largest unitholder of JASIF with a 4.25% stake based on the book closing date of May 23. Gulf holds a 41.19% stake in Intouch Holding, the parent company of AIS.