True Corp will be forced to raise additional capital once the National Telecommunications Commission begins auctioning new third-generation mobile phone licenses. A capital call would be in addition to the rights issue approved last week by shareholders.
True plans to float 10 billion new shares in a rights issue priced at 1.29 baht (US$0.04) per share. Funds from the capital increase will be used to retire existing debt.
True chief executive Supachai Chearavanont said the company was intent on moving to a 3G network for its mobile subsidiary True Move.
The company plans to begin testing 3G services based on the 850 megahertz band from early 2009.
But the NTC license auction would be for the 2.1GHz wavelength. Mr Supachai said if the auction moved forward, True would definitely be a bidder for a spectrum allocation.
Mr Supachai said True would invest three billion baht (US$86 million) in True Move's current GSM service and five billion baht for 3G services in 2009.
"We will move forward with 3G on both wavelengths. We have already begun importing and installing equipment for the 850MHz band," he said.
"For the new NTC licenses, we will need to wait and see the conditions. If we do decide to bid, then a new capital increase would be needed."
A capital call, however, would be difficult in the current market environment, considering True's high cost structure and the slowing economy. True shares closed yesterday at 1.41 baht (US$0.04), up three satang, in trade worth 24.09 million baht (US$69,000).
Mr Supachai said that offering 3G services based on the 850MHz band would be three times cheaper than creating a new 2.1GHz network.
But an 850MHz system would force True to comply with revenue-sharing terms with the government, a burden that new NTC licensees would not have to pay.
In any case, Mr Supachai reiterated that the CP Group, the largest single shareholder of True, was prepared to invest over 1.2 billion baht (US$34,000)and exercise its rights in the upcoming capital increase.
CP could increase its 27.5 percent shareholding and subscribe to additional unsubscribed shares if the offering were not fully taken up, he added.
The German development bank KfW has also indicated its intention of exercising its right to take up the shares.
Mr Supachai said if the offering was not fully subscribed or if CP did not increase its investment, True could split the share offering into several tranches.
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