SHIN Deal: Is National Security Compromised?

Many observers fear prying eyes from abroad may now have easy access to both sensitive information and activities. Singapore state-firm Temasek’s takeover of local mobile-phone and satellite concessions, along with broadcasting and air-traffic rights, has raised alarm that it may endanger national security and strategic interests, economists and observers said last week.

They said the biggest worry were the security issues involved when a foreign company could obtain access to information and activities many countries deem sensitive.

Their comments came as Temasek Holdings acquired a 49.6-per-cent stake in Shin Corp. The shares belong to Prime Minister Thaksin Shinawatra’s family and the Damapong family.

Klanarong Chantik, former secretary-general of the National Counter Corruption Commission, on Friday said: “Singapore’s takeover of Thai satellite and TV concessions is likely to emerge as contentious issues because of economic and security implications.”

He said broadcasting and satellite operations involve security, and it is not appropriate to let these fall into the hands of foreigners.

“This is especially so as Thaicom is the name given by His Majesty the King,” he said of the name of the local satellite. Thaksin on Friday moved to calm such concerns. “Satellite and mobile-phone concessions belong to the government,” he said. “The company is just putting money in it and manages it. The government is the owner [of the concessions]. Nobody can take it away. That is because the law does not allow private sector ownership.”

Chalee Chanthanayingyong, senior assistant secretary-general of the Securities and Exchange Commission (SEC), said Temasek was interested only in AIS, a Shin Corp mobile-phone service provider subsidiary, even though Shin Corp has other concession-related businesses such as Shin Sat and iTV.

Thanks to the deal, Temasek will indirectly hold the majority stake in AIS, which has around 16 million subscribers at present. The SEC requires Temasek to launch tender offers for just Shin and AIS. However, a source close to the deal was sceptical as to whether AIS was the sole target of Temasek.

“Based on the price of Bt49.50 a share [for Shin], I think the price is too expensive to acquire just AIS,” he said. “I think Temasek is also looking at other Shin Corp businesses especially Shin Sat, Thai AirAsia and iTV.”

Somkiat Tangkitvanich, a research director at the Thailand Development Research Institute, earlier said the sale was not an ordinary business deal because Shin Corp controls important government’s concessions.

He also commented that while other foreign companies were limited by current laws, which restrict foreign ownership in a number of service businesses, the Temasek case seems to have circumnavigated all the regulations. As a result, it has enabled a foreign firm to be a major shareholder of these protected services.

Another analyst said that when Shin Sat received a state concession it had to sign an agreement that binds it to use it in a way that protects the national interest. The company’s decision to sell its concessions may run counter to the pledge.

Even Western countries with liberal economies perceive the media industry as a special industry that continues to be shielded from foreign investors.

For example, US regulators bar foreigners from owning TV stations. This ruling forced the Australian-born tycoon Rupert Murdoch to adopt US nationality before he could buy media assets there.

US lawmakers also objected to a bid by China National Offshore Oil Corp (CNOOC) to buy Unocal, an oil company.

The size of the US oil industry is more than a trillion dollars. But even a $18.5 billion Unocal bid from a China firm was not considered puny. Calling the industry a “strategic” sector, the US did not allow the transaction to go through.

The case of the Shin deal is an example of such a situation, said the source. Singapore has acquired key industries such as telecom and banking. He called Singapore a “mini-US in South East Asia”.

He added: “Switching ownership from Thai to foreign does not necessarily create competition. Competition can be created by privatising to Thais and by imposing a law that limits the size of stakes that can be sold to foreigners. “Selling low stakes is okay. That may facilitate technology transfer,” he said. “But selling large stakes is not okay.”

The Australian government also strives to protect its media industry in the Thai-Australia free-trade agreement. The pact allows Canberra to examine foreign bids to buy shares in its broadcast and print businesses on a case-by-case basis.

Another source said the Shin deal would “complete the Singapore firm’s plan to strike big in Thailand,” he said. He said the deal would also turn Capital OK, a Shin Corp fast-cash service subsidiary, into a complete Singaporean company, because the remaining 40-per-cent stake belongs to the Development Bank of Singapore (DBS), which is also an affiliate of Temasek.

The source predicted that DBS would also raise its stake in TMB Bank from the current 10 per cent to 25 per cent in the near future to strengthen its presence here.