TRIS Rating Co., Ltd. views no immediate impact on credit ratings of True Corporation PLC (TRUE) after the company announced to purchase the mobile business from Hutchison Group.
TRIS Rating today says that there is no significant credit implication at present with regard to TRUE’s announced plan to expand its mobile phone business by acquiring shares of Hutchinson Group’s subsidiaries. TRUE announced on 30 December 2010 that it had entered a Share Sale and Purchase Agreement to purchase Hutch’s mobile business by acquiring shares in four companies: Hutchison Wireless Multimedia Holdings Co., Ltd., BFKT (Thailand) Co., Ltd. (BFKT), Rosy Legend Ltd., and Prospect Gain Ltd. The deal will include share purchase in a total amount of Bt4.35 million as well as debt refinancing in the value not exceeding Bt6,300 million which will be financed by bank loans. After the acquisition, BFKT will continue to be the lessor of telecommunication network equipment to CAT Telecom PLC (CAT). TRUE, through its subsidiaries, will be a reseller of service and capacity of the network that it purchased from CAT.
On a broad credit perspective, TRIS Rating says, the acquisition could serve as TrueMove’s post-concession business platform and strengthen its competitiveness in terms of greater data service capacity from the addition of 10MHz bandwidth in the 850MHz spectrum. In addition, viable business model after concession could alleviate pressure on TrueMove’s needed debt refinancing in 2012-2013.
However, the acquisition also exposes TRUE to certain risks. Although TRIS Rating has insufficient information of condition precedents in the purchase agreement and several uncertainties surrounding the deal execution, TRUE is expected to execute the acquisition under a concrete and clarified regulatory framework so as to avoid future regulatory challenges. However, there is also a concern over TRUE’s network investment after the acquisition to differentiate in service capacity. TRUE’s financial profile is weak and could not afford a sizable debt financing without a strong case of commensurate cash flow visibility.
In the meantime, TRIS Rating will continue to monitor the progress of the acquisition and assess the full credit implications once vital details regarding the validity of regulatory compliance, the natures of network lease and reselling contracts, and the conditions and covenants of loan agreements are disclosed.
TRIS Rating currently rates TRUE’ company and issue ratings at “BBB” with “negative” outlook. -- End
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