Thaicom has become embroiled in a legal scandal relating to corruption charges against its previous owner, former Thai Prime Minister Thaksin Shinawatra.
On February 26, the Thai Supreme Court seized Bt46.37bn (US$1.42bn) of Thaksin’s assets, more than…
Thaicom has become embroiled in a legal scandal relating to corruption charges against its previous owner, former Thai Prime Minister Thaksin Shinawatra.
On February 26, the Thai Supreme Court seized Bt46.37bn (US$1.42bn) of Thaksin’s assets, more than half his US$2.3bn fortune. It ruled that during his time as Prime Minister from 2001 to 2006 Thaksin abused his power to promote the business of a number of his assets including Thaicom, formerly known as Shin Satellite, and in doing so caused revenue losses to the Thai state.
There are three particularly serious charges relating to Thaicom. The first is that in 2004, Thaksin directed the Thai ExIm bank to provide a low interest US$127m loan to the government of Burma in 2004, a loan the court ruled was subsequently used to purchase capacity from Thaicom. The company was still under the ownership of Thaksin at the time.
The interest was so low that the Thai Finance Ministry had to divert funds from the national budget to subsidise the loan, costing the Thai exchequer Bt14m in the fiscal year of 2006/2007.
The second major charge relates to the concession Thaicom holds with the government for the operation of domestic satellites.
The court ruled that members of Thaksin’s cabinet allowed Thaicom to change the terms of its concession in order to launch its broadband satellite IPSTAR in 2005. The original concession, agreed in 1991, specified that Thaicom must order a back-up satellite for the Thaicom 3 satellite, and that the new satellite must carry C- and Ku-band transponders suitable for domestic communications.
IPSTAR carries no C-band transponder usable for Thai government agencies, and carries an array of Ku- and Ka-band capacity tailored for broadband provision. Just 6% of IPSTAR’s transponders are used for service in the Thai market, with the majority of its capacity spread out across Asia-Pacific.
The third charge relates to a separate amendment of the concession that allowed Thaksin’s telecommunications conglomerate Shin Corp reduce its holding in Thaicom from a maximum of 51% to 40%, lessening its financial burden.
In 2006, Thaksin sold his 49.6% stake in Shin Corp to the Singaporean group Temasek, which took over the controlling stake in Thaicom.
The Thai Information and Communications Technology Ministry has set up a committee to examine the concession amendments made to Thaicom, and to assess whether the company itself is liable to pay damages.
The possibility exists that the concession will be withdrawn, effectively putting Thaicom out of business as a satellite operator.
In this scenario, it is likely that Temasek would seek to exit the business and sell Thaicom’s assets to a buyer that would negotiate a new concession with the Thai government.
Thaicom’s share price plunged by more than 20% from Bt6.01 to a low of Bt4.24 immediately following the court ruling, but the operator has staged a recovery over the course of March, rising back above Bt5.50.
