In the past week you’ve seen ADVANC drop into the 210’s only to rebound back to 230’s levels – why? Well its the usual noise between a government and a private operator where concessions are in play, its standard for any emerging country to have these issues. So what were the headlines that drove the news? Well here goes:
It is regarding 2 amendments that were passed without cabinet approval which have been cited by the Supreme Court in it’s 2010 ruling finding Thaksin guilty of abuse of power
TOT needs $ to compensate for the loss of income stream from the regulator fee and TOT may have not wanted to file this lawsuit because in reality it is the fault of TOT’s previous executives that failed to the submit the amendments at hand for cabinet approval.
So as per Thai Law, the responsibility does fall upon the public enterprise (TOT!) and not the private enterprise (ADVANC) to ensure that it was done correctly, but with a military government in charge TOT was been ordered to serve legal notice on ADVANC for the damages claims amounting to THB 72 bn so TOT is in the position where it had to take legal action against ADVANC or face criminal prosecution for negligence.
So this issue will be dragged into the courts and it’s rather obvious that yes Thaksin abused his power, that yes TOT were fools to not submit simple documents, that the existing shareholders of ADVANC should not be held responsible, and that the drop in share price was rather silly but led to great buying opportunities for those aware. Therefore we can only wait and see what the Thai courts will decide over the coming years/decades/centuries in regards to this case to see if TOT is legally at fault.
Will this prevent ADVANC from bidding for 4G? Nope they have assigned Advanced Wireless Network (AWN), its wholly-owned subsidiary, to bid for the 1800 MHz and 900 MHz licenses and the NBTC has confirmed that AWN was allowed to enter the bidding because they are separate entities.
Little noticed news that U-Tapao’s airport will become more developed thereby allowing flights from Bangkok as well as (potentially) other regional airports, why should we care? By next year U-Tapao will have a new passenger terminal worth about 200 million baht. The new building together with its existing terminal will raise its passenger capacity from 800,000 to 3 million per year and by 2020 5 million. And well Pattaya, for all of its downfalls, does represent a sizeable portion of Thailand’s tourism industry and listed companies such as ERW, CENTEL, MINT and DTC all have hotels there that haven’t been performing well since the Russian Ruble took its fabled 50% dive at the end of last year/beginning of this year. Plus let’s not forget about all of the industrial estates and manufacturing hubs not too far away either.
Indonesia – A country with a population 3x that of Thailand, a GDP size 3x that of Thailand, a population demographic that is 30% younger, is far behind Thailand in terms of infrastructure and average wage/population but is still growing nearly 2x the speed of Thailand. How could this not make sense as an investment opportunity? Infrastructure spending there is most likely going ahead faster than Thailand the impact should be far more impactful than what we see here, the highways/subways/mass transit are all experiencing an upgrade or massive expansion throughout several parts of the country, interesting that when I visited this week for the first time since in 1.5 years i was pleasantly surprised to discover that it only took 30 mins to go and from the hotel during the morning/mid-day, granted it is just a small microcosm of the entire city’s infrastructure but you can’t quite say the same for Bangkok nor any other (ex singapore) cities in SE Asia. Companies themselves are also still very wary of debt (post ’97 crisis phenomena), but the currency volatility has made nearly early company we’ve seen feel hesitant about capex expansion for the next 1-2 years, perhaps this could be the right period to find some gem’s down there.
One thought on “Random Thoughts: ADVANC, Pattaya/Utapao, Indonesia”
Jay
I think point #5 is extremely telling. The ADVANC Board saw this coming a mile away and have no doubt made all the necessary preparations to ensure this 72bn baht hit to their balance sheet never happens.
Jay
I think point #5 is extremely telling. The ADVANC Board saw this coming a mile away and have no doubt made all the necessary preparations to ensure this 72bn baht hit to their balance sheet never happens.