TOT Plc has put off its plan to establish an infrastructure fund for another nine months after discovering that its existing rental network pattern does not match the conditions for the establishment of the fund.
The state telecom enterprise had initially planned to set up its infrastructure fund by March this year to expand its underground piping business to capitalise on strong growth in demand for telecom networking.
TOT will transfer the rights to use its existing underground pipe assets to the fund to allow investors to buy into the fund. It appointed Bualuang Securities last year as its financial adviser to establish the fund, which is expected to be a 10 or 15-year fund.
TOT has 25,000 kilometres of underground pipe infrastructure across the country, renting to 10 telecom companies to place their cables into the pipes.
But all 10 companies signed rental contracts with TOT for between one and three years, too short a time span to provide reliable revenue.
"The existing contract posed a key obstacle for establishing an infrastructure fund that usually lasts for at least 10 years," said TOT president Monchai Noosong.
TOT is in talks with the 10 companies to revamp the contracts, extending the rental period to at least 10 years. The negotiations are expected to be settled by October, he said.
"TOT plans to list its infrastructure fund on the SET by Jan 2018," said Mr Monchai.
Under the fund concept, TOT will transfer the rights to use its existing underground pipe assets to the fund to allow investors to buy into the fund's shares. TOT can use the revenue generated from the assets.
But TOT will not transfer the underground pipe assets to the fund to avoid criticism of allowing the private sector to dominate the fund.
TOT will acquire a 33% stake in the infrastructure fund to cope with specific conditions for the establishment of an infrastructure fund.
Mr Monchai said TOT's underground piping service can generate 450 million baht in rental revenue a year. TOT charges the 10 telecom companies a rate of 20,000 baht per kilometre per month.
TOT expects the underground piping business to generate 1 billion baht in revenue by 2020, driven by the government's policy to put power lines and cables underground.
The government plan to bury a combined 127km of power lines and telecom cables through 39 routes in three provinces (Bangkok, Samut Prakan and Nonthaburi) by 2020. The project would cost 51.7 billion baht.
The Metropolitan Electricity Authority has been assigned to invest 48.7 billion baht to group all existing overhead power lines in the three provinces and place them underground. For its part, TOT will invest 3 billion baht to create new underground pipes or conduits and group all existing telecom and broadcasting cables into them.
TOT now operates under its turnaround business plan assigned by the State Enterprises Policy Commission.
TOT reported total revenue of 30.8 billion baht in 2016. Its earnings before interest, taxes and amortisation was 1.6 billion baht. But TOT booked a net loss of 5.8 billion baht onto its financial statement due to the amortisation of its asset depreciation.