Financial Analysis report on Disposal and Acquisition of Assets by Independent Financial Advisor For. Prepared by

Transcription

1 (Translation) Financial Analysis report on Disposal and Acquisition of Assets by Independent Financial Advisor For True Corporation Public Company Limited Prepared by JVS Financial Advisory Co., Ltd. 12 September 2013 Disclaimer: The English translation report has been prepared solely for the convenience of foreign investors only. If there is discrepancy between the English translation and Thai report, the Thai report shall be definitive and the official document and supersede the English translation report in all aspect of any inconsistency with this English translation report. of securities for sale into the United States or any other jurisdiction. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1993, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering is being made in the United States

2 Table of Content Background of the Transaction... 3 Executive Summary... 5 Part 1 Acquisition and disposal of Assets 1. Characteristics and Details of the Disposal and Acquisition of Assets 1.1 Date/ Month/ Year of the Transaction Involved Parties and Relationship with the Company The General Characteristics of the Transaction Details of the Disposed and Acquired Assets Source of Fund Used in the Acquisition of Assets The Proposed Utilisation of the Proceeds from the Disposal of Assets Conditions for Entering into the Transaction Objectives, Pros, Cons, and Risks of the Transaction 2.1 Objectives and Background of the Transaction Pros of the Transaction Cons of the Transaction Risk Factors Uses of the Proceeds from the Disposal of Assets Sources and Adequacy of Fund Valuation of the Transaction and its Conditions Summary of the Independent Financial Advisor s Opinion Part 2 Details and Information on the Company Overview of True Corporation Public Company Limited territories and possessions, any state of the United States and the District of Columbia). This announcement is not an offer of securities for sale into the United States or any other jurisdiction. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1993, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering is being made in the United States

3 Abbreviations and Definitions SEC, The Office of the SEC The Stock Exchange, SET The Company, TRUE True Group, the Group Subsidiaries Independent Financial Advisor The Fund, Infrastructure Fund The Investment Units Telecom Infrastructure Assets, Assets The Transaction AWC BFKT BITCO CAT,CAT Telecom RF, RFT, Real Future Real Move TMV, TrueMove TUC The Office of Securities and Exchange Commission of Thailand The Stock Exchange of Thailand True Corporation Public Company Limited True Corporation Public Company Limited and its subsidiaries Subsidiaries of True Corporation Public Company Limited JVS Financial Advisory Company Limited Telecom Infrastructure Fund established to invest in Telecom Infrastructure Assets of the Company and its subsidiaries in accordance with disposal and acquisition of assets of the Transaction Investment units of the Infrastructure Fund Assets to be sold to the Telecom Infrastructure Fund comprise of (A) Right on telecommunication towers and Passive infrastructure assets related to mobile services and those to be transferred in the future of the Company and/or subsidiaries. (B) Fiber optic cable system, transmission equipment, and provincial broadband system of TUC (C) Right to receive revenues from leases of telecommunication towers and Passive infrastructure assets related to fiber optic cable system of AWC (D) Right to receive revenues from leases of related telecommunication towers, Passive infrastructure assets, fiber optic cable and transmission equipment of BFKT Disposal and Acquisition of Assets Asia Wireless Communication Company Limited BFKT (Thailand) Company Limited Bangkok Inter Teletech Public Company Limited CAT Telecom Public Company Limited Real Future Company Limited Real Move Company Limited True Move Company Limited True Universal Convergence Company Limited territories and possessions, any state of the United States and the District of Columbia). This announcement is not an offer of securities for sale into the United States or any other jurisdiction. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1993, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering is being made in the United States

4 Abbreviations and Definitions (con.) Asset and Revenue Sale Agreement Towers, telecommunication towers, or telecom towers Transmission Equipment An agreement between the Fund and the Company and/or each of its subsidiaries regarding the sale and transfer of the right on their telecommunication assets and the sale and transfer of any right on future revenues and other benefits of the telecommunication assets that belong to the transferor (if any) started on the valuation date to ending date of any related agreement (excluding any right or revenue incurred before the agreed date between counter parties). Telecommunication towers including towers on the ground, towers on roof tops, and Distributed Antenna System Equipment of transmission system via FOC system and/or micro wave frequency receivers territories and possessions, any state of the United States and the District of Columbia). This announcement is not an offer of securities for sale into the United States or any other jurisdiction. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1993, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering is being made in the United States

5 Technical Terms 2G 3G 4G Backhaul dark fiber FOC, fiber optic cable HSPA, High Speed Packet Access Node B Core Kilometers Distributed Antenna System, DAS Active Telecommunication Infrastructure Passive Telecommunication Infrastructure 2 nd Generation of Mobile Telecommunications Technology, which is a digital wireless phone service including GSM, GPRS, and EDGE 3 rd Generation of Mobile Telecommunications Technology, which can enhance send and receive speed of data and voice beyond 2G via HSPA technology 4 th Generation of Mobile Telecommunications Technology, which can enhance send and receive speed of data and voice beyond 3G via LTE technology Transmission system for transmitting voice and data in telecommunication mobile network from Node B to RNC and major network equipment Unused Fiber Optic Cable (FOC) which can be used for telecommunication fiber optic system Fiber optic cable to be used as a medium in transmission system High Speed Downlink network and Uplink Packet Access network at the same time Equipment installed on telecommunication towers and other places in mobile telecommunication network connecting to mobile headsets. It works as "base station" of 3G system compared to other networks Measure unit of fiber optic cable calculated by using number of cores multiply by a length of fiber optic cable Antenna System for distribute signal for base stations inside building including Feeder Cables and Antenna System. DAS is a network of connecting points of antenna separated inside a building and DAS is used by a mobile operator to strengthen its coverage inside the building. Parts of telecommunication system which use electricity and/or electronics such as Node B equipment, antenna for radio frequency wave, communication equipment, and main system equipment Parts of telecommunication system such as telecommunication towers, radio towers, container system, Sun Shelter, and FOC territories and possessions, any state of the United States and the District of Columbia). This announcement is not an offer of securities for sale into the United States or any other jurisdiction. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1993, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering is being made in the United States

6 No. Jor038/ September 2013 Subject: Analysis on the Disposal and Acquisition of Assets Transaction for True Corporation Public Company Limited by Independent Financial Advisor To: Board of Directors and Audit Committee Ref.: True Corporation Public Company Limited 1) Resolution of True Corporation Public Company Limited Board of Directors in the meeting No. 5/2556, held on 19 th July ) Notification of the Resolutions of the Board of Directors Meeting Re: the Entry into Transactions with the Infrastructure Fund, the Sale of Investment in Ordinary Shares of Non-Core Subsidiaries of the Company and the Convening of the Extraordinary General Meeting of Shareholders No. 1/2556 and later amended notes. 3) Draft Notification Re: Acquisition or Disposal of Assets related the entry into the Transaction with the Infrastructure Fund of True Corporation Public Company Limited shown in the appendix of the Notification to Independent Financial Advisor No. PS 010/2556 Re: The changes of the size of the Asset and Revenue Sale Transaction with the Infrastructure Fund of True Corporation Public Company Limited on 6 th September ) Financial Statements of True Corporation Public Company Limited and its subsidiaries on December 31, 2010, December 31, 2011, December 31, 2012, March 31, 2013, and June 30, 2013 audited by PricewaterhouseCoopers ABAS Company Limited. 5) Report of the Infrastructure Fund structure, business, and telecommunication industry analyses conducted by Analysys Mason dated July 18, ) Draft of the prospectus to offer the Telecommunication Infrastructure Fund investment units (Not final). 7) Drafts of contracts between the Company and/or its subsidiaries and the Infrastructure Fund related to the Asset and Revenue Sale Transaction (Not final). 8) Draft of a legal opinion regarding the dispute on the right of telecommunications towers between CAT Telecom Public Company Limited and True Move Company Limited dated July 29, 2013 by Baker & McKenzie Company. 9) Policies and guidelines on accounting and tax by the Company and its advisors. 10) Company Certificates, Memorandums of Association, and other documents together with management and staff interviews of True Corporation Public Company Limited and its subsidiaries and financial advisor. 1

7 Disclaimers: 1) The study of JVS Financial Advisory Company Limited ("Independent Financial Advisor" or "JVS FA") in this report is based on information and assumptions provided by the Management of True Corporation Public Company Limited and its subsidiaries and public information in the Securities and Exchange Commission website ( and the Stock Exchange of Thailand website ( 2) Independent Financial Advisor will not be responsible for any profit or loss and any effects incurred by the Transaction. 3) Independent Financial Advisor's study was conducted with professional knowledge, skill, and car, based on professional practice. 4) Independent Financial Advisor determined and gave our opinion to the Transaction based on current situation and information available to our knowledge. Any material adverse changes and effects may alter the study result of Independent Financial Advisor. 5) The study proposed to the Board of Directors and Audit Committee of True Corporation Public Company Limited is only the analyses on appropriateness of the disposal and acquisition of assets and the price. The analyses are not related to completion and/or success of the Transaction, the success of True Corporation Public Company Limited, and the performance of the Infrastructure Fund in the future. This study is not considered an IFA opinion on the disposal and acquisition of assets as per the disclosure requirement, per transaction size criteria of Type 1 transaction, in according with the Resolution of True Corporation Public Company Limited Board of Directors in the meeting No. 5/2556, held on 19 th July The purpose of this study is to provide in depth financial analysis related to the Transaction and to be used as part of the information for the Company s operation or decision in entering the Transaction. 2

8 Background of the Transaction The Board of Directors Meeting of True Corporation Public Company Limited (the Company ) has resolved in the meeting No. 5/2556, held on 19th July 2013, to approve that the Company and/or its subsidiaries enter into transactions with an infrastructure fund (the Fund ), which is currently in the process of applying for an approval from the Office of the Securities and Exchange Commission (the Office of the SEC ) to be established to raise fund (the IFF Transaction ). The resolutions of the Board of Directors' Meeting on the acquisition and disposal of assets in connection with the IFF Transaction can be summarized as follows: 1. The Board of Directors of the Company approved that the Company and/or its subsidiaries: (1) sell and transfer certain assets and revenue and/or lease certain assets of the Company and/or its subsidiaries (as specified in the Company's Notification) following the registration of establishment of the Fund; and (2) sell certain assets and revenue and/or lease certain future assets of the Company and/or its subsidiaries following the sale of assets for initial investment to the Fund (the Asset and Revenue Sale and Lease Transfer Transaction ). The Asset and Revenue Sale and Lease Transfer Transaction will be in accordance with the terms and conditions stipulated under the Asset and Revenue Sale agreement, the lease agreement and/or such other relevant agreements. 2. The Board of Directors of the Company approved the entry into the acquisition of assets whereby: 2.1 The Company and/or its subsidiaries lease back, lease and/or sub-lease assets specified under clause 4 from the Fund for use in the continuance of its business (the Lease-Back and Lease/Sub-Lease Transaction ). 2.2 The Company and/or juristic persons designated by the Company to subscribe for investment units subscribe for no more than one-third of total number of investment units of the Fund (the "Investment Units Subscription Transaction") On July 19, 2013, the Board of Directors approved the appointment of JVS Advisory Company Limited as an Independent Financial Advisor in order to provide and submit the opinion on the entry into the transactions with the Infrastructure Fund to the Company s shareholders including preparing necessary documents as required by relevant authorities. According to the Notification of the Resolutions of the Board of Directors Meeting on July 23, 2013, the asset disposal under the Transaction is subjected to comply with the Notification of the Capital Market Supervisory Board No. TorChor.20/2551 re: Rules on entering into Material Transactions Deemed as Acquisition or Disposal of Assets, and the Notification of the Board of Governors of the Stock Exchange of Thailand re: Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets, B.E and its 3 rd Amendment, B.E. 2555(the "Acquisition or Disposal of Assets Notification"). The notifications require the Company, under Type 1 transaction due to the transaction size of the combined disposal and acquisition of assets, to (a) disclose information on the acquisition and disposal of assets to the Stock Exchange of Thailand (the "SET"); (b) appoint an independent financial adviser; and (c) hold a general meeting of shareholders to consider and approve the Asset and Revenue Sale and Lease Transfer Transaction. The transaction must be approved by a resolution of no less than three-fourth (3/4) of the total 3

9 number of votes of shareholders who are present and are entitled to vote, excluding interested shareholders. The Company shall send a notification of convening of the shareholder meeting together with opinions of an independent financial advisor to its shareholders within 14 days be for the shareholder meeting. The Board of Directors approved to propose the Asset and Revenue Sale and Lease Transfer Transaction to the Extraordinary General Meeting of the Shareholders No. 1/2556 for consideration and approval on September 12, However, the Company issued the Notification TRUE-SEC 061/2556 to postpone the Extraordinary General Meeting of the Shareholders No. 1/2556 on August 23, 2013 because the Company found that there is a lot of information related to the entry into transactions with the Infrastructure Fund and it is necessary to provide the Independent Financial Advisor sufficient time for studying and providing opinions on the acquisition and disposal of assets in connection with the entry into transactions with the Infrastructure Fund to the Company s shareholders. Later the Company issued the Notification No. PS 010/2556 dated September 6, 2013 Re: The changes in the Transactions and a draft of Notification Re: Acquisition or Disposal of Assets related the entry into the Transaction with the Infrastructure Fund of True Corporation Public Company Limited (Account No. 2). According to the Notification of the Capital Market Supervisory Board No. TorChor.20/2551 Re: Rules on entering into Material Transactions Deemed as Acquisition or Disposal of Assets, and the Notification of the Board of Governors of the Stock Exchange of Thailand Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets, B.E and its 3 rd Amendment, B.E. 2555(the "Acquisition or Disposal of Assets Notification"), the 2 transactions under the draft Notification above are categorized as an acquisition of assets Type 2, since their combined size is equal to or greater than 15% but less than 50%. Therefore, the Company must issue a report and disclose the Transactions per Account No. 1 to SET. The Company is required to send a notification to its shareholders within 21 days after the SET disclosure, with Account No. 2. The Company will hold its Board of Directors meeting No. 6/2556 on September 13, 2013 in order to approve the changes in the Transactions and approve the amended acquisition or disposal of assets under the Transaction. The Company and/or its Board of Directors deems it is appropriate to seek the Company s shareholders approval for the Asset and Revenue Sale Transaction and plans to hold a shareholder meeting to approve the Transaction, where a resolution of no less than half of the total number of votes of shareholders attended and entitled to vote, excluding interested shareholders, shall be obtained (See more detail of Notification per Account No. 2 to be distributed to shareholders). The analysis of the Acquisition or Disposal of Assets by the Independent Financial Advisor is not a report of the Independent Financial Advisor's opinion of an acquisition or disposal of assets under the Type 1 category according to the Board of Directors' resolution in the meeting No. 5/2556 on July 19, The analysis of the Acquisition or Disposal of Assets by the Independent Financial Advisor is conducted based on the objective to provide financial analyses of the Transactions for the Company's consideration in order to enter into the Transaction. 4

10 Executive Summary True Corporation Public Company Limited (the Company or True ) intends to dispose telecom infrastructure assets and rights to receive future benefits from telecom infrastructure assets of the Company and its subsidiaries to the Telecom Infrastructure Fund (the Fund ) and to have agreements to lease certain telecom infrastructure assets back from the Fund for their usual business operations. The Company plans to use the proceeds of the disposal of the assets and/or the lease of the assets transaction to repay parts of the Company s and its subsidiaries loans from financial institutions, which would significantly strengthen the True Group s capital structure and enhance its investing ability. Moreover, the proceeds would provide liquidity to the True Group and the Company and its subsidiaries may use some of the proceeds for their future investments for their business expansion. As the result, the Company can have a better financial position, reduce its debt, increase its liquidity, and enhance its investment ability. The Company and its subsidiaries are still operating their telecommunications businesses as usual by leasing the disposed assets back from the Fund. Moreover, the Company and its subsidiaries will subscribe to the Fund investment units for not less than 18% and no more than % of the total number of the investment units of the Fund. The subscription will provide an opportunity to earn income from the Fund investment units in term of dividend received and capital gain in the future if the investment unit Net Asset Value (NAV) per unit increases. The Company and/or its subsidiaries will be a telecommunications asset manager of the Fund. The disposal of the telecom infrastructure assets transaction by establishing the Fund and offering the Fund investment units to public will be the first telecommunication infrastructure fund in Thailand to lease and provide other benefits from its telecom infrastructure assets to the True Group, as anchor tenants, and other telecommunication operators, via infrastructure sharing, in the future. The Company believes that the Telecom Infrastructure Fund will be a PLATFORM for Thailand telecommunication business development which is beneficial to telecommunication customers because telecommunication infrastructure expansion can be leased or shared instead of built by each operator to expand their own network separately, a.k.a., Telecommunication Infra Structure Sharing, which will result of more efficiency of the resource sharing in the future. 5

11 Summary of the Company s and its subsidiaries assets related to the disposal of assets transaction Details of the disposal of asset transaction Book values of the assets (approximate) on the transfer date (unit : million baht) Company Telecommunication FOC and Broadband Total towers systems AWC 4,650 4,650 BFKT 1,661 6,678 8,339 The Company and/or its subsidiaries 7,200 7,200 TUC 6,387 6,387 Total 13,511 13,065 26,576 Summary of the approximated number of the infrastructure assets on the transfer date AWC Company Telecommunication towers FOC and Broadband systems 4,360 towers BFKT 1,485 towers FOC and equipment 9,169 links Distance 47,250 kilometers The Company and/or its subsidiaries 6,000 towers TUC Remarks Core FOC distance 5,112 kilometers and provincial broadband system 1.20 million ports Total 11,845towers FOC system 9,169 links with distance 47,250 kilometers and Core FOC distance 5,112 kilometers and provincial broadband system 1.20 million ports Transfer date estimated to be before year end 2013 except the telecommunication tower of The Company and/or its subsidiaries which will be transferred 3,000 towers in 2015 and 3,000 towers in 2016 The 6,000 telecommunication towers have an approximated value of 7,200 million baht (by using cost method, not market price) Data from the Company management as of September 1,

12 Summary of the Company's structure before and after the Transactions Before The Company and its subsidiaries Assets Loans Principal and interest Loan Providers Remarks The Company and its subsidiaries are the owners of the Telecom Infrastructure Assets, funded by loans from financial institutions and equity from shareholders. The Company and its subsidiaries have obligations to pay principal and interest to the loans from financial institutions. After The Company and its subsidiaries Proceeds from the acquisition of assets Lease and right payment Uses of the lease assets Fund Manager Telecom Infrastructure Fund Assets Investment Dividend Investment and Dividend (with a portion of no more than 33.33%) Investment unit holders Remark The Company and its subsidiaries dispose their telecom infrastructure assets to the newly established Fund. Nonetheless, the Company and its subsidiaries still utilize the assets by leasing the assets from the Fund. Moreover, one of the Company's subsidiaries will subscribe the Fund investment units in an aggregate amount of not less than 18% but not exceeding one-third (or %) of the total number of investment units. After the Transactions, the Company and its subsidiaries have obligations to pay for the lease of the assets and/or the right on benefit or revenues received in the future. They also have a responsibility to operate and maintain the assets and receive the operating fees as an asset manager. One of its subsidiaries will receive dividends from the Fund as an investment unit holders in an aggregate amount of not less than 18% but not exceeding one-third (or %) of the total number of investment units. 7

13 Pros, Cons, and Risks of the Transactions The Independent Financial Advisor's opinions regarding pros, cons and risks of the Transaction can be concluded as follow Pros 1. By entering the Transactions, the Company and its subsidiaries will receive the proceeds from the disposal of the assets to the Fund approximately 60,000-70,000 million baht (rounded down from 64, million baht) or approximately 40,000-48,000 million baht after the Group's investment in the investment units and reserves. In case the Company was to use the whole proceeds amount to repay loans, the Group s loans will reduce at the approximate amount of 40,000-48,000 million. 2. By entering the Transactions, the Company and its subsidiaries will improve their capital structure and will reduce the Company's Debt to Equity ratio from times as of June 30, 2013 to times accounted to the loan repayment, profits from the asset disposal, and the Transaction expenses within 1 2 years (excluding its performance and other financial activities). equity. 3. The Company's and its subsidiaries' obligations to pay principals and interests will be less. 4. The Company and its subsidiaries will gain from the Transaction which increases their shareholder 5. The Company and its subsidiaries can improve their financial position, reduce their debts, and enhance their business expansion ability in the future. expansion. 6. The Company and its subsidiaries can use the Fund structure to raise fund for their future business 7. The Fund establishment is one of the Company's financing options which currently have conditions, obligations, and limitations less than of the company's loans. Thus, the Company can expand its investment and borrow money easier in the future. 8. The Telecom Infrastructure Fund establishment is the Company's long-term capital structure plan and connected to its telecommunication business structure plan. Cons and Risks 1. The Company and its subsidiaries have obligations to pay for the lease and/or the right on the assets fees in the future. 2. The Company may lose controls of utilizing the assets in the future. 3. The Company may obligate to pay the taxes on the profit from disposal of the asset transaction. 4. The Company may lose lease incomes of the assets to other parties in the future and the Transactions may provide competition ability to existing and new telecommunication operators. 5. The Company has a risk from the assets maintenance quality because the existing fund manager might be changed to a company which is not the Company and/or its subsidiary. 6. The Company and its subsidiaries have a risk of transferring the 6,000 telecommunication towers on time. 7. Legal risks of the Transaction are 1) a risk that CAT Telecom may exercise its right to acquire the telecommunication towers and 2) a risk that the Fund is required to earn a telecommunication business license from NBTC which would increase the Transaction cost from license fees. 8

14 Appropriateness of the Price Fair Value of the Transactions Value Remarks (million baht) (million baht) 1. Book Value Approach 26,747 Not appropriate 2. Discounted Cash Flow Approach 64,000 74,000 Use for consideration to set a selling price as a minimum value or base value 3. Book Building Approach To be set Appropriate approach for price setting The Company and/or its subsidiaries plans to dispose the assets to the newly established Telecom Infrastructure Fund at the value by collecting demands for the Fund investment units from institution investors (Bookbuilding Process), which is an approach to offer assets with a market price agreed by a seller and a buyer within a certain period of time under the condition that the seller and buyer have no conflict of interest. However, there are other factors affecting the asset price such as the capital market condition during the offering and the Fund capital requirement for the asset acquisition. The Independent Financial Advisor has opinions that the disposed asset pricing is appropriate due to the Bookbuilding approach, which is deemed to be appropriate because it can collect demand from institution investors who analyze the Fund fundamental information and performance together with economic, capital market and money market conditions before their investments. In addition, the Company has 2 financial advisors to value the disposal of the asset value. The Independent Financial Advisor has no reservation to the asset disposal to the Infrastructure Fund by using the asset value set from the Bookbuilding approach. The asset value, between 64,000-74,000 million baht, would provide the Company to receive an appropriate price for its disposed assets and it will benefit the Company under the market condition during the period of offering the Fund investment units to domestic and international investors. The offering size is regarded as one of the largest public offering in Thailand. However, the offering must undergo the final price setting process and the Company and its Financial Advisor including the Underwriters before the final price is set and can offer the investment units to investors. If the number of booking is greater than offering size based on the price range, the Bookbuilding approach will be successful and the final price is a fair market price, which is set by the seller and buyer under the current market condition. The factors affect the final price including; 1. The Bookbuilding process can cover wide-range of institution investors domestically and internationally and has appropriate number of investors and the Bookbuilding period is proper. 9

15 2. Prospects of the Fund operation and performance as well as Thailand telecommunication industry, new analyst reports, or changes of analysts' recommendations and outlooks during the offering period. 3. This disposal of the asset transaction is a massive one time transaction (approximately 64,000-74,000 million baht). 4. News and information regarding the dispute and the inspection by government agencies during the offering. 5. Movement of capital markets domestically and internationally during the offering. The Independent Financial Advisor has an opinion that the acquisition and disposal of asset transactions by using the Telecom Infrastructure Fund is one of the fund raising options in the capital and money markets. The Independent Financial Advisor also has an opinion that the Company's asset value disposed to the Fund has a fair value approximately 64,000-74,000 million baht. The Independent Financial Advisor believes that the Bookbuilding approach is one of appropriate methods to set a final selling price of the assets sold to the Fund. In conclusion, the disposal and acquisition of assets benefit the Company and its subsidiaries as a whole is beneficial to the Company. The value of the disposal and acquisition of assets is proper and derived from a suitable approach. Nonetheless, the final consideration to enter the Transaction depends on the Company's Board of Directors and shareholders. Thus, the Company's Board of Directors and shareholders can use the Independent Financial Advisor's report for their further consideration. 10

16 Part1 Disposal and Acquisition of Assets 11

17 1. Characteristics and details of the disposal and acquisition of assets (Copy from draft Notification of the Company that the Independent Financial Advisor received from the Company) 1.1 Date/ Month/ Year of the Transactions The disposal of assets The Asset and Revenue Sale Transaction will take place after the Fund has been registered with the Office of the SEC and the conditions precedent specified in the Asset and Revenue Sale Agreement and the lease agreements have been satisfied or waived. The acquisition of assets (1) The Lease Transaction The Lease-Back and Lease/Sub-Lease Transaction will take place after the Fund has been registered with the SEC and the conditions precedent specified in the Master Lease Agreement have been satisfied or waived. (2)The Investment Units Subscription Transaction The Investment Units Subscription Transaction will take place after the Office of the SEC has approved the establishment of the Fund and during the subscription period of the investment units of the Fund, which will be announced later by the fund management company. 1.2 Involved Parties and Relationship with the Company The disposal of assets Buyer: The Fund to be established and managed by a fund management company in accordance with the Securities and Exchange Act, B.E (as amended) (the "SEC Act") Seller: The Company and/or its subsidiaries which are True Corporation Public Company Limited, Asia Wireless Communication Company Limited( AWC ), True Universal Convergence Company Limited ( TUC ) and BFKT (Thailand) Company Limited ( BFKT ) Relationship with the Company: The subsidiaries are subsidiaries of the Company more than 50 percent of the total voting rights of which are held by the Company. The Fund does not have any relationship with the Company and/or its subsidiaries. However, after the Office of the SEC has approved the establishment of the Fund, the Company and/or juristic persons to be designated by the Company to subscribe for investment units plan to subscribe for investment units of the Fund in an aggregate amount of not less than 18% but not exceeding one-third (or approximately 33.33%) of the total number of investment units of the Fund. Therefore, the Company and/or juristic persons to be designated by the Company to subscribe for investment units will be unit holder(s) of the Fund in an aggregate amount of not less than 18% but not exceeding one-third (or33.33 %) of the total number of investment units. The acquisition of assets (1) The Lease-Back and Lease/Sub-Lease Transaction Lessor: The Fund to be established and managed by a fund management company in accordance with the SEC Act Lessee: The Company and/or its subsidiaries, which are TUC, BFKT, and RFT 12

18 Relationship with the Company: The lease is the Company s subsidiary with the ownership more than 50% of the total voting rights of which are held by the Company. The Fund does not have any relationship with the Company and/or its subsidiaries. However, after the Office of the SEC has approved the establishment of the Fund, the Company and/or juristic persons to be designated by the Company to subscribe for investment units plan to subscribe for investment units of the Fund in an aggregate amount of not less than 18% but not exceeding one-third (or approximately 33.33%) of the total number of investment units of the Fund. Therefore, the Company and/or juristic persons to be designated by the Company to subscribe for investment units will be unit holder(s) of the Fund in an aggregate amount of not less than 18% but not exceeding one-third (or33.33 %) of the total number of investment units. (2) The Investment Units Subscription Transaction Buyer: The Company and/or juristic persons to be designated by the Company to subscribe for investment units Seller: The Fund to be established and managed by a fund management company in accordance with the SEC Act Relationship with the Company: The subsidiaries are subsidiaries of the Company more than 50 percent of the total voting rights of which are held by the Company. The Fund does not have any relationship with the Company and/or its subsidiaries. However, after the Office of the SEC has approved the establishment of the Fund, the Company and/or juristic persons to be designated by the Company to subscribe for investment units plan to subscribe for investment units of the Fund in an aggregate amount of not less than 18% but not exceeding one-third (or approximately 33.33%) of the total number of investment units of the Fund. Therefore, the Company and/or juristic persons to be designated by the Company to subscribe for investment units will be unit holder(s) of the Fund in an aggregate amount of not less than 18% but not exceeding one-third (or33.33 %) of the total number of investment units. 1.3 The General Characteristics of the Transactions The disposal of assets The Company and/or its subsidiaries (AWC, TUC and BFKT) will sell assets and/or revenues to the Fund. The Asset and Revenue Sale Transaction will be in accordance with the terms and conditions stipulated in the Asset and Revenue Sale Agreement and the Company and/or its subsidiaries and the Fund are going to enter into the Agreement. The acquisition of assets (1)The Lease Transaction The Company and/or its subsidiaries (TUC and RFT) will lease the assets specified under sub-clause 4) Details of the acquired and disposal of assets 4.2 The acquisition of the assets The Lease Transaction from the Fund for using in the continuance of its businesses by the Lease Transaction, which will be in accordance with the terms and conditions stipulated in the relevant Master Lease Agreement to be agreed upon and entered into among the Company and/or its subsidiaries and the Fund. (2) The Investment Units Subscription Transaction After the Office of the SEC has approved the establishment of the Fund, the Company and/or juristic persons to be designated by the Company to subscribe for the investment units will subscribe for no less than 18% and no more than one-third (approximately %) of the total number of the investment units of the Fund 13

19 1.4 Details of the acquired and disposal of assets The disposal of assets Details of assets to be disposed of in the assets and revenues transaction are as follow: No Subsidiaries Transactions Assets and amount (approximated) Net Book Value of related assets (approximated) (million baht) 1 the Company and/or its subsidiaries Sale of assets Existing or new telecommunication towers approximately 6,000 towers (1,800 towers in Bangkok Metropolitan and 4,200 tower in other provinces), transferred to the Fund during the next 2 years ( ) 7,200 14

20 No Subsidiaries Transactions Assets and amount (approximated) Net Book Value of related assets (approximated) (million baht) 2 BFKT (1) Sale of revenue and (2) Sale of assets when conditions pursuant to the Asset and Revenue Sale and Transfer Agreement are met. The following lease payments that BFKT lease under the telecommunication lease equipment agreement in order to provide mobile services in HSPA dated January 27, 2011 between BFKT and CAT Telecom Public Company Limited ("CAT") and its amendment (the "HSPA lease agreement") until the end of the agreement. (1) Telecommunication towers 1,485towers (existing 1,455 towers and under construction 30towers as of July 31, 2013) (2) FOC system and related transmission equipment including; Existing 9,169 Links with the length of 47,250 km. (equal to 680,400 core kilometers) Under construction 226 Links with the length of 7,338 km. (equal to 105,664 core kilometers) as of July 31, 2013The assets under (1) and(2) above will be transferred when the condition in the disposal of assets and right agreement have met. Before the tower ownership has transferred, BFKT will dispose lease revenues to the Fund. 8,339 15

21 No Subsidiaries Transactions Assets and amount (approximated) Net Book Value of related assets (approximated) (million baht) 3 AWC (1) Sale of revenue and (2) Sale of assets when conditions pursuant to the Asset and Revenue Sale and Transfer Agreement are met. Revenues from telecommunication towers 4,360 towers (existing 3,830 towers and under construction530 towers) under the telecommunication tower lease agreement between AWC and BFKT before they enter into disposal of assets and right agreement. The assets above will be transferred when the conditions in the disposal of assets and right agreement have met. And before the tower ownership has transferred, AWC will dispose lease revenues to the Fund. 4,650 4 TUC Sale of Assets (1) Core FOC system length 5,112 km. [equal to 122,690 core kilometers](existing 2,479 km. and under construction 2,663 km. [equal to 63,192 core kilometers] as of July 31, 2013) and related transmission equipment (2) Broadband system in the provincial area in Thailand of 1,200,000 ports (existing 1,060,000 ports and under construction 140,000 ports) 6,387 16

22 The acquisition of assets The Lease-Back and Lease/Sub-Lease Transaction Assets to be sold to the Fund under clause 1.4 are infrastructure assets which can be shared with other operators. The Company and/or its subsidiaries intend to lease some parts of assets sold to the Fund under clause 1.4that the Company and/or its subsidiaries require for utilization. The Fund may lease the rest to other operators parts of assets that the Company and/or its subsidiaries do not require for utilization in accordance with terms and conditions stipulated under the Master Lease Agreement and other relevant agreements to be agreed upon and entered into by the Company and/or its subsidiaries and the Fund. No Subsidiaries Transactions Assets and amount (approximated) Transaction Value (approximated) (million baht) 1 RFT Lease back for 14 years from the transfer date Slots on existing and new telecommunication towers approximately 6,000 towers. The Company and/or its subsidiaries will transfer to the Fund within 2 years ( ) 28,100 2 TUC Lease back for 13 years (1) FOC Core System (unit: core) with a distance of 5,112 km. including the under construction system and transmission equipment. 16,300 (2) Provincial broadband system in Thailand of 1,200,000 ports including the under construction broadband system The Investment Units Subscription Transaction Details of assets to be acquired in the Investment Units Subscription Transaction are as follows Details of assets The Fund will be a publicly traded infrastructure fund providing unit holders with an opportunity for the investment unit holders to invest in the telecommunication infrastructure business. The Fund s principal investment mandate is to invest in infrastructure businesses which have the potential of long-term growth to ensure regular payout of distributions to unit holders 17

23 The following diagram illustrates the structure of the Fund and the relationships among the Management Company, the Fund Trustee, the Telecom Asset Manager, the Company and/or its subsidiaries, the Selling Entities, the anchor tenants, the juristic persons to be designated by the Company to subscribe for the investment units (as the unit holder of no less than 18% but no more than 33.33% of the total number of the investment units of the Fund) after the initial offering, and other unit holders upon the registration of the establishment of the Fund, and upon the completion under the Asset and Revenue Sale and Transfer Agreements and relevant agreements. Management of the Fund The Fund management company will manage the Fund in compliance with the Fund Scheme, the Commitment, as well as the rules or regulations as announced by the Office of the SEC under the SEC Act. 18

24 1.5 Source of Fund Used in the Acquisition of Assets Source of fund used in the Lease Transaction will come from the operational cash flow of the Company and/or its subsidiaries. Source of fund used in the Investment Units Subscription Transaction will come from proceeds received from the Asset and Revenue Sale Transaction and/or bridge loan from commercial banks. 1.6 The Proposed Utilization of the Proceeds from the Disposal of Assets The Company and/or its subsidiaries may use proceeds received from the Fund in, among others, (1) repayment of debt or reserve for repayment of bridge loan and other debts of the Company and/or its subsidiaries and/or (2) investment in projects of the Group. 1.7 Conditions for the Entering into the Transactions The disposal of assets The disposal of assets in the Asset and Revenue Sale Transaction shall be conditional upon: (a) The fulfillment of conditions as specified in the Asset and Revenue Sale Agreement or the asset lease agreement (as the case may be); (b) The approval from the Office of the SEC for the establishment and management of the Fund; (c) The offering of investment units to the public and general investors; and (d) The registration of assets for the Fund. Due to the categorization of the above transaction as the disposal of assets, Type 2, pursuant to the Acquisition or Disposal of Assets Notification, the Company shall have the following duties: (1) To disclose information on the entry into such transaction by the Company to the SET; (2) To send the notice to shareholders regarding the Company s asset acquisition However, in order to obtain the approval from shareholders meeting for the Asset and Revenue Sale Transaction, the Company will propose the transaction to the Company's Extraordinary General Meeting of the Shareholders. The vote must be no less than half of the total number of votes of shareholders attending the meeting and having the right to vote, excluding the votes of the interested shareholders. In this regard, the Board of Directors will resolve to convene the shareholder meeting No. 1/2556 later. The acquisition of assets (1) The Lease Transaction The Lease-Back and Lease/Sub-Lease Transaction shall be conditional upon: (a) The fulfillment of conditions stipulated under lease agreements (if any); (b) The approval from the Office of the SEC for the Fund to be established and managed by the fund management company; (c) The offering of investment units to the public and general investors; and (d) The registration of assets for the Fund. 19

25 (2) The Investment Units Subscription Transaction The Investment Units Subscription Transaction shall be conditional upon: (a) The fulfillment of conditions stipulated under the investment unit s subscription agreement; (b) The approval from the Office of the SEC for the Fund to be established and managed; (c) The offering of investment units to the public and general investors; and (d) The registration of assets for the Fund. The above transactions (1) and (2) are categorized as the acquisition of assets, Type 2, pursuant to the Acquisition or Disposal of Assets Notification. Thus, the Company shall have the following duties: (1) To disclose information on the entry into such transaction by the Company to the SET and the Company has disclosed the information to SET on July 23, 2013 and September 13, 2013; (2) To send the notice to shareholders regarding the Company s asset acquisition However, in order to obtain the approval from shareholders meeting for the Asset and Revenue Sale Transaction, the Company will propose the transaction to the Company's Extraordinary General Meeting of the Shareholders. The vote must be no less than half of the total number of votes of shareholders attending the meeting and having the right to vote, excluding the votes of the interested shareholders. In this regard, the Board of Directors will resolve to convene the shareholder meeting No. 1/2556 later. 20

26 2. Objectives, Pros, Cons, and Risks of the Transaction 2.1 Objectives and Background of the Transaction Objectives of the Transaction True Corporation Public Company Limited (the Company or True ) intends to dispose telecom infrastructure assets and rights to receive future benefits from telecom infrastructure assets of the Company and its subsidiaries to the Telecom Infrastructure Fund (the Fund ) and to have agreements to lease certain telecom infrastructure assets back from the Fund for their usual businesses The Company plans to use the proceeds of the disposal of the assets and/or the lease of the assets transactions to repay parts of the Company s and its subsidiaries loans from financial institutions, which would significantly strengthen the True Group s capital structure and enhance its investing capacity. Moreover, the proceeds would provide liquidity to the True Group and the Company and its subsidiaries may use some of the proceeds for their future investments for their business expansion. As the result, the Company can have a better financial position, reduce its debt, increase its liquidity, and enhance its investment capability. The Company and its subsidiaries are still operating their telecommunications businesses as usual by leasing the disposed assets back from the Fund. Moreover, the Company and its subsidiaries will subscribe for no less than 18% and no more than one-third (approximately %) of the total number of the investment units of the Fund. The subscription will provide an opportunity to earn revenues from the Fund investment units in term of dividend received and capital gain in the future if the investment unit Net Asset Value (NAV) per unit Increases. The Company and/or its subsidiaries will be a telecommunications asset manager of the Fund. The disposal of the telecom infrastructure assets transaction by establishing the Fund and offering the Fund investment units to public will brand the Fund to be the first telecommunication infrastructure fund in Thailand in order to lease and provide other benefits from its telecom infrastructure assets to the True Group, as a major lease, and other telecommunication operators, via network sharing, in the future. The Company believes that the Telecom Infrastructure Fund will be a PLATFORM for Thailand telecommunication business development which benefits to telecommunication customers because telecommunication infrastructure expansion will be a lease instead of operators building or expanding their owned network separately. Moreover, with the PLATFORM, a new telecommunication operator can enter the business easier by leasing the telecommunication network rather than rebuilding its new assets (Telecommunication Infra Structure Sharing), which will result of more efficiency of the resource sharing. 21

27 Background of the Transactions The Company's debt obligations and financing costs (the consolidated financial statement) The Company and its subsidiaries have the total liabilities of 181,167 million baht as of June 30, 2013 or 94.81% of the total assets. The liabilities are consist of the current liabilities of 80,907 million baht and non-current liabilities (or long-term liabilities) of 100,260 million baht. The Details of the liabilities are as follow; 30 Jun 13 (THB MM) % of total 31 Mar 13 (THB MM) % of total 31 Dec 12 (THB MM) % of total Liabilities Short-term borrowings 9, , , Trade and other payables 53, , , Current portion of long-term 14, , , borrowings Income tax payable Other current liabilities 3, , , Total current liabilities 80, , , Long-term borrowings 83, , , Deferred income tax liabilities 4, , , Liabilities under agreements for 2, , , operation Employee benefits obligations Other non-current liabilities 8, , , Total non-current liabilities 100, , , Total Liabilities 181, , , Shareholders' Equity 9, , , Total Assets 191, , , Borrowing from Financial Institutions Total of Short-term and Long-term Borrowings 30 Jun 13 (THB MM) % of total 31 Mar 13 (THB MM) % of total 31 Dec 12 (THB MM) % of total 106, , , As of June 30, 2013, the Company and its subsidiaries have the short-term and long-term borrowings of 106,910 million baht which can be divided to the short-term borrowings of 9,440 million baht, current portion of long-term loans of 14,216 million baht and the long-term borrowings of 83,254 million baht. 22

28 Financing Costs of the Company and its subsidiaries (million baht) 30 Jun Mar Dec Dec Dec 10 Interest Expense 3, , , , , Loss (Gain) from foreign exchange rate , , Other financing costs , , Finance costs- Net 3, , , , , Short-term and Long-term Borrowings 106, , ,423 85,238 72,472 Interest Rate to calculate financing costs of the Company and its subsidiaries divided by the average of the Shortterm and Long-term Borrowings 30 Jun Mar Dec Dec Dec 10 Interest Expense 7.23% 7.21% 7.02% 11.78% 8.25% Loss (Gain) from foreign exchange rate -0.80% -2.41% -0.77% 5.40% -2.30% Other financing costs 0.61% 0.82% 0.35% 1.81% 1.75% Finance costs- Net 7.05% 5.62% 6.59% 18.99% 7.70% Interest Expense and Other financing costs(excluding FX) 7.85% 8.04% 7.37% 13.59% 10.00% Remarks: The calculations are annualized and based on the average of the short-term and long-term borrowings Forecast of debt payments in theory Assumptions: Borrowing amount 106,910 million baht, 7% interest rate, and the principal is equally annually amortized. Debt repayment of all short-term and longterm borrowings payments Principal and interest 1st year interest 1st year principal 7 years 19,837 7,484 12, years 17,904 7,484 10, years 16,409 7,484 8, years 15,222 7,484 7, years 13,460 7,484 5, years 11,738 7,484 4, According to the Company's and its subsidiaries' financial statement as of December 31, 2012, the Company and its subsidiaries have the current portion of long-term borrowings of 9,522 million baht with the financing cost around 7.00% or 7,000 million baht. Thus, in total, the Company and its subsidiaries have the financing obligation of approximately 16,500 million baht in 2013 (the Company can refinance the amount by borrowing short-term and long-term loans). But if we presume that the Company and its subsidiaries repay their loans within 8-10 years, in theory, the Company and its subsidiaries would have obligations to pay for principal and interest around 15,000-18,000 million baht per year. 23

29 Loan information of each company in the True Group as of December 31, 2012 (million baht) From Individual Financial Statement AWC BFKT Property, plant and equipment Borrowing from related parties Total borrowing Financial cost 4, ,542 2,469 12,893 1,037 True Move 26,326 6,227 27,030 2,576 TUC 13,716-6, Total of the 4 related companies 62,370 9,346 46,494 3,928 Real Future (Holding company of True Move and BFKT) - 5,660 6, Total of the 4 related companies and Real Future 62,370 15,006 52,524 4,311 True 9,575 2,231 30,933 1,181 Total of the 4 related companies, Real Future and True (A) 71,946 17,238 83,457 5,492 True and subsidiaries (consolidated) (B) 86,680 -** 101,423 6,154 Other companies (the difference) (B) - (A) 14,734 - * 17, Remark: Bangkok Inter Teletech Public Company Limited, True Properties Company Limited and Telecom Holding Company Limited, the holding companies of True Move, TUC and AWC, are not listed in the table above because they do not have significant amount of loans and do not have any asset related to the Transaction. *Not applicable from the different calculation and **consolidated financial statement does not state loans from related parties. Borrowing structure of the True Group as of as of December 31, 2012 BFKT True Move TUC Total borrowing (million baht) % of total 12, , , Real Future 6, True 30, Total of the 6 companies 83, Other companies (the difference) 17, True and subsidiaries (consolidated) 101, Remark: Do not include loans from related parties 24

30 Shareholding Structure of the True Group related to the Transaction Details of main businesses and assets of the Company's major subsidiaries Companies Asia Wireless Communication Company Limited (AWC) (100% owned by the Company) BFKT (Thailand) Company Limited(BFKT) (99.99% owned by the Company) Real Future Company Limited(RF) (99.99% owned by the Company) True Universal Convergence Company Limited(TUC) (100% owned by the Company) Capital Structure of the True Group December 31, % 99.99% Telecom Holding Company Limited True Properties Company Limited 99.99% 59.41% 99.40% Real Future Company Limited(RF) Bangkok Inter Teletech Public Company Limited(BITCO) 40.59% Asia Wireless Communication Company Limited(AWC) True Move Company Limited(TMV) 99.99% 99.92% BFKT (Thailand) Company Limited(BFKT) 0.03% True Universal Convergence Company Limited(TUC) 99.97% Details of main businesses and assets A cordless fixed-line phone service(pct) At the end of 2012 it has the total assets of 5,513 million baht and the property, plant and equipment of 4,786 million baht. A lessor of telecommunications system equipment (with High Speed Packet Access technology and Code Division Multiple Access technology) and accessories to CAT Telecom Public Company Limited At the end of 2012 it has the total assets of 26,095 million baht and the property, plant and equipment of 17,542 million baht. Real Future was granted IMT 2.1 GHz spectrum licenses by the NBTC in December This not only extends the Group s mobile businesses at least until 2027, but also strengthens True Mobile Group, allowing it to offer great coverage and high quality 3G services nationwide. Its subsidiaries operate 2G, 3G and CDMA mobile businesses under the brands TrueMove, TrueMove H and Hutch, respectively. The subsidiaries are TrueMove and Real Move (a CAT Telecom s 3G+ reseller under the flagship brand, TrueMove H) through a subsidiary, BITCO. Real Future s shareholding in BITCO was 99.4 percent at the end of 2012.At the end of 2012 it has the total assets of 108,225 million baht and the property, plant and equipment of 45,191million baht (the consolidated financial statement). Granted a Type Three license from the NTC since 2006.At the end of 2012 it has the total assets of 19,263 million baht and the property, plant and equipment of 13,716million baht 25

31 The True Group's assets Details of the assets related to the disposal Transaction Approximated book value of the related assets on the transfer date (unit: million baht) Companies Telecommunication towers FOC and Broadband Systems Total AWC 4,650 4,650 BFKT 1,661 6,678 8,339 The Company and/or its subsidiaries 7,200 7,200 TUC 6,387 6,387 Total 13,511 13,065 26,576 Summary of the approximated number of the infrastructure assets on the transfer date Company Telecommunication towers FOC and Broadband systems AWC 4,360towers BFKT 1,485 towers FOC and equipment 9,169 links Distance 47,250 kilometers The Company and/or its subsidiaries 6,000 towers TUC Remarks Core FOC distance 5,112 kilometers and provincial broadband system 1.20 million ports Total 11,845 towers FOC system 9,169 links with distance 47,250 kilometers and Core FOC distance 5,112 kilometers and provincial broadband system 1.20 million ports Transfer date estimated to be before year end 2013 except the telecommunication tower of The Company and/or its subsidiaries which will be transferred 3,000 towers in 2015 and 3,000 towers in 2016 The 6,000 telecommunication towers have an approximated value of 7,200 million baht (by using cost method, not market price) Data from the Company management as of September 1,

32 Transaction Structure 1. Disposal and lease-back of the AWC's telecommunication towers (Approximately 12 years) Before After AWC Telecom Infrastructure Fund AWC BFKT Assets (Telecom towers) Assets (Telecom towers) Remark The transaction is disposal of right on future revenues. The disposal of right on future revenues is calculated from the right of the entire telecommunication towers, after expenses such as land rental, for 12 years to BFKT only. After the end of the 12 years lease transaction, the transaction will be a disposal of assets and lease back transaction. 2. Disposal and lease-back of the Real Future's and its subsidiaries' telecommunication towers Before After The Company and /or subsidiaries Telecom Infrastructure Fund Real Future Assets (Telecom towers) Assets (Telecom towers) Other lessees Remark The disposal of asset transaction is a true sale transaction. The Assets are the telecommunication towers and/or its subsidiaries build or acquire. The telecommunication tower lease transaction is for Real Future to use slots on the telecommunication towers, deducting expenses such as maintenance, for 14 years. 27

33 3. Disposal of rights of future revenues and benefits from the BFKT's assets (Approximately 12 years) Before After BFKT CAT Telecom Telecom Infrastructure Fund BFKT CAT Telecom Assets Assets Remark The assets are telecommunication towers and FOC system of BFKT The transaction is to dispose of rights of the assets' future revenues. The revenue sharing of the assets is calculated by lease payments for the entire towers subtract expenses such as land rent and future revenues from FOC system. The revenue sharing is around 12 years for BFKT. After the 12 years of revenue sharing, the transaction will a disposal and lease-back of the assets together with Call Option to the Fund. 4. Disposal and lease-back of the TUC's assets Before After TUC Telecom Infrastructure Fund TUC Assets Assets Other lessees Remark The assets are FOC system and Broadband system of TUC. The disposal of asset transaction is a true sale transaction. The lease transaction is 5 years and13 years based on type of assets. 28

34 Summary of the types of asset disposals AWC BFKT Companies The Company and/or its subsidiaries TUC types of asset disposals and explanation Conditional disposal transaction Dispose by transferring the right to receive future benefit of the assets for 12 years with the condition to transfer the ownership of assets at the price of the remaining balance plus 10 million baht cash. Conditional disposal transaction Dispose by transferring the right to receive future benefit of the assets for 12 years with the condition to transfer the ownership of assets at the price of the remaining balance plus 10 million baht cash. True sale transaction Dispose by transferring the ownership to the Fund True sale transaction Dispose by transferring the ownership to the Fund Accounting treatments Recognize profit/loss from the difference between a selling price and book value when the Company and/or subsidiaries terminate the revenue guarantee to the Fund Recognize profit/loss from the difference between a selling price and book value when the Company and/or subsidiaries terminate the revenue guarantee to the Fund Recognize profit/loss from the difference between a selling price and book value on transfer dates Recognize profit/loss from the difference between a selling price and book value Taxes No immediate profit for tax calculation but the profit will occur annually from interest income and at the time of actual asset disposal. No immediate profit for tax calculation but the profit will occur annually from interest income and at the time of actual asset disposal. Taxed the profit from the sale on transfer dates Taxed the profit from the sale Remark: The summary of the accounting treatments and taxes is based on the consultation with the Company's financial advisor, its tax advisor, and PricewaterhouseCoopers ABAS Company Limited Value Added Tax (VAT): The asset seller is obligated to pay VAT by collecting from the Fund (since the assets are not transferred back to the previous owners according to the Royal Decree No. 533). The VAT will be calculated from the base price, which is not less than the market price. The Fund can credit sell taxes and get tax credit from the Revenue Department (Only if the Fund becomes a VAT operator before the sell taxes occur) Other taxes: No special business tax, withholding corporate income tax, and stamp duty 29

35 Summary of the Company's structure before and after the Transactions Before Loans The Company and Loan Providers its subsidiaries Principal and interest Assets Remarks The Company and its subsidiaries are the owners of the Telecom Infrastructure Assets, funded by loans from financial institutions and equity from shareholders. The Company and its subsidiaries have obligations to pay principal and interest to the loans from financial institutions. After The Company and its subsidiaries Proceed from the acquisition of assets Lease and right payment Uses of the lease assets Fund Manager Telecom Infrastructure Fund Assets Investment Dividend Investment and Dividend (with a portion of no more than 33.33%) Investment unit holders Remark The Company and its subsidiaries dispose their telecom infrastructure assets to the newly established Fund. Nonetheless, the Company and its subsidiaries still utilize the assets by leasing the assets from the Fund. Moreover, one of the Company's subsidiaries will subscribe the Fund investment units in an aggregate amount of not less than 18% but not exceeding one-third (or33.33 %) of the total number of investment units. After the Transactions, the Company and its subsidiaries have obligations to pay for the lease of the assets and the right of benefit receives. They also have a responsibility to operate and maintain the assets and receive the operating fees as an asset manager. One of its subsidiaries will receive dividends from the Fund as an investment unit holders in an aggregate amount of not less than 18% but not exceeding one-third (or33.33 %) of the total number of investment units. 30

36 Assumptions and Financial Projection for the analysis of impacts of the transaction to the Company The Independent Financial Advisor has set assumptions and simulated financial projections in order to analyze the transaction regarding the transaction s Pros, Cons, and Risks. The calculation according to the assumptions and the financial projections are as follow; 1. Assumptions of estimated values of the Telecom Infrastructure Fund and the investment units acquired by the Company The Fund estimated The Company s Value of disposed The Company s Other investors values* investment portion assets investment portion investment portion 60,000 million baht* 20% 60,000 million baht 12,000 million baht 48,000 million baht 70,000 million baht* 20% 70,000 million baht 14,000 million baht 56,000 million baht Remarks *The Independent Financial Advisor apprises the asset value by the DCF approach and the value is between 64,000 74,000 million baht. Under this analysis, The Independent Financial Advisor is using the round number of 60,000 70,000 million baht (round down to 000 million figure)for the Conservative Analysis. 2. Estimated disposed asset values by each company (unit: million baht) Companies Estimated book values Portion Estimated value Estimated value on a transfer date (%) THB 60,000 MM(Low) THB 70,000 MM(High) AWC 4, % 10,498 12,248 BFKT 8, % 18,827 21,965 The Company and/or its 7,200 subsidiaries 27.1% 16,255 18,964 TUC 6, % 14,420 16,823 Total 26, % 60,000 70,000 Remarks Data from the Company management as of September 1, 2013 The proportion is calculated by the asset values. 3. Projected profits of each company (unit: million baht) Companies Estimated book values on a transfer date 4,650 Difference btw. projected values and book values (Low) Difference btw. projected values and book values (High) Difference btw. projected values and book values (midpoint rounded to 000) AWC 5,848 7,598 7,000 BFKT 8,339 10,488 13,626 12,000 The Company and/or 7,200 its subsidiaries 9,055 11,764 10,000 TUC 6,387 8,033 10,436 9,000 Total 26,576 33,424 43,424 38,000 Remarks Tax will be calculated from the difference between projected values and book values using a mid-point rounded to 000) Use cost method, not market price. 31

37 4. Projected tax obligations of each company (units: million baht) Companies Tax credit Tax credit 31 Dec Cost Approach Remarks AWC BFKT TUC The Company and/or its subsidiaries 18,040 (tax credit of the Company) Difference btw. projected values and book values (midpoint rounded 000) Projected tax obligations (20%) 3,691 6, ,000 No immediate tax obligation 1,066 1,066 12,000 No immediate tax obligation - - 9,000 1,800 (approximately) 18,040 10,000 - (tax credit of the Company) 1,800 (approximately) Total Assumption : the Group has more loss from AWC in 2013 of approximately 3,000 million baht Assumption: The BFKT and AWC s disposal of the right on future cash flows is not subject to be taxed as it is the selling and transferring right in revenues in the future. Assumption : The book value of the Company s and/or its subsidiaries 6,000 telecommunication towers are approximately 7,200 million baht based on their book value approach case (not by the market value approach) Assumption: in case the Company is the seller of 6,000 towers to the Fund, the tax credit can be used in full amount. The corporate income tax is 20%. The tax obligation projection might be changed due to accounting/using of tax credits policies of the disposal of the assets and performance in 2013 of each company. Estimation of the use of tax credit of the 6,000 telecommunication towers transferred during the next 2 years will be used by the Company for tax planning in the future. 5. Estimated lease payment/other benefits after deducting the Fund management fees and dividend between Estimated lease payment/other benefits after deducting the Fund management fees Companies Estimated lease payment and Estimated the Fund s expenses to The difference before revenue sharing The Companies and subsidiaries dividends The Company and 5,800-6,500 million baht 800 1,000million baht 5,000 5,500million baht* subsidiaries Remarks The estimations are between because at the years that revenues and expenses of the Fund are expect to be stable. *IFA has rounded the number to five hundred million figures for the purpose of illustrating and basic analysis. Estimated future revenues after the Fund expenses and dividends Companies The difference before dividends Estimated dividends from the Fund The Company and subsidiaries Remarks The difference after dividends 5,000 5,500 million baht 1,000 1,100million baht 4,000 4,400million baht The Fund pays 100% of profit as dividend (for the analysis) The Company and its subsidiaries hold the Fund investment units 20% of total units outstanding 32

38 6. Estimated principals and interest of the disposed asset amount (unit : million baht) Projected cash flows from the Transaction Estimated the disposed asset value 60,000 70,000 Deduct: The investment in the Fund investment units (12,000) (14,000) Deduct: The Fund establishment expenses and other expenses (1,500) (1,500) Deduct : Taxes of profit from the sales (2,000) (2,000) Deduct : Reserve for new investments and/or debt repayments (4,500) (4,500) Projected cash flows from the Transaction 40,000 48,000 Debt repayment schedules (assumptions : 7% interest rate and repay annually equally) Projected principals and interest 40,000 48,000 8 years 6,699 8,038 9 years 6,139 7, years 5,695 6,834 Currently, the Company and its subsidiaries have the debt repayment schedules around 8 10 years on average. In theory, if the Company uses the proceed to repay the loans of 40,000 48,000 million baht, the Company and its subsidiaries can save principals and interest of approximately 5,700 8,000 million baht per year. All assumptions above are the estimations of the analysis in theory in order to explain what will happen if the Company and its subsidiaries enter the Transaction. It will only tell pros, cons and risks of the Transaction. In practice, there is a possibility that the Company can choose other options such as not paying most of its debts, reserving for its working capital, planning for tax flexibility, etc., thus, the result may differ from the theory. The Independent Financial Advisor opined that if the Company chooses to do as the above assumptions and estimations, the financial result would align with the projection (excluding the Transaction costs such as the Fund establishment fees, underwriting fee, legal counsel expenses, financial advisor fees, and tax obligations from the Transaction, etc.) 33

39 2.2 Pros of the Transaction By entering the transaction, the Company will benefit as follow: 1. Receive proceed from the disposal of the assets to the Fund approximately 60,000-70,000 million baht (round down from 64,000 74,000) or approximately 40,000-48,000 million baht after the Group's investment in the investment units and reserves. In case the Company use the whole precede amount to repay loans, the Group s loans will reduce at the approximate amount of 40,000-48,000 million. The Company expect to receive proceed from the disposal of the assets to the Fund approximately 60,000-70,000 million baht (round down from 64,000 74,000). In case the Company proceed is deduct with the following items: 1) subscribe for 20 percent of the total number of the investment units of the Fund 2) pay Fund establishment cost of 1,500 million baht 3) taxes reservation at the amount of 2,000 million baht 4) other reservation at the amount of 4,500 million baht, the amount of proceed that can be used to repay loan from bank is approximately 40,000 48,000 million baht. As of 30 June 2013, the Company and its subsidiaries have short term and long term loan at the amount of 106,910 million baht. If the Company use the proceeds received from the transaction of approximately 40,000 48,000 million baht to repay the loan, the Company and its subsidiaries loan will decrease to an approximate amount of 58,910 66,910 million baht. 2. Adjust the financial structure of the Company and its subsidiaries. By entering the transaction, the Company and its subsidiaries financial structure will adjust. The debt to equity ratio will decrease from (as of 30 June 2013) to the following figure The Company and its subsidiaries Notes: Debt to Equity ratio (times) before transaction 30June March December2013 Estimate Debt to Equity ratio (times) After transaction Repay the loan (exclude profit from sale of assets) Include profit from sale of assets Assume that the Company repays the loan at the amount of 40,000 48,000 million baht. Assume that the profit from sale of asset (after expenses and taxes) within 1-2 years at the amount of 29,424 39,424 million baht according to the transfer of 6,000 telecommunication towers until the end of the transaction. The estimation was made in exclusion of year end performance and other financial activities between Decrease obligations to pay principals and interests. In 2013 the Company is expect to pay the interest expenses at the amount of 7,000-7,500 million baht (at the interest rate of approximately 7 percent). After the transaction, the Company s interest expenses are expected to decrease to approximately 4,100 4,700 million baht. Also between the Company is expect to repay the loan principal at the approximate amount of 9,521 million baht (the amount calculated from long term loan that will end in 1 year at year end 2012). After the transaction, the loan principal is expecting to decrease to an approximate amount of 5,700 6,500 million baht (calculated with 8 year PMT with interest begin on first year). However, the terms and conditions of the loan might adjust to best fit the Company cash flow. 34

40 4. Book the profit from the transaction The Company and its subsidiaries is expect to book the profit from sale of asset at the approximate amount of 33,424 43,424 million baht or 29,924 39,924 million baht after expenses and taxes. The accounting earnings of the sale of asset will strengthen the shareholder s equity. 5. Improve financial position, reduce debts and enhance future business expansion. As the Company and its subsidiaries have decrease its debt and lower its financial cost, which increase the liquidity of the Company and strengthen its financial position, the Company become more attractive to the investor both in tern of debt and equity instrument. Also the company will has more financial rest and able to expand its investment in telecommunication asset, which will result in better performance and growth of the Company. 6. Use the Fund structure to raise fund for future business expansion In case the transaction is successful and led to an adequate amount of proceed to the company, in the future the Company might raise fund with Fund establishment. The proceeds can be used to invest in new technologies in the future and, therefore building and developing telecommunication business. Also if the Company has more investment in the same type of asset that the Company sells to the Fund in this transaction, the Fund could invest in the asset and lease back to the Company and its subsidiaries. 7. The Fund establishment is one of the Company's financing options which currently have conditions, obligations, and limitations less than of the company's loans. Thus, the Company can expand its investment and borrow money easier in the future. As of 31 December 2012, the Company and its subsidiaries have high level of debt. The amount of Company s long term loan, including long term loan that due in 1 year, is 96,327 million baht. Meanwhile the Company shareholder s equity is 14,004 million baht, therefore the Company is facing risk from unable to raise enough funds to meet its yearly obligation on loan s principal and interest and it also might impact the future expansion of the company. The Company's operation could be impact from financing obligation that state in its financial contract. As such, the Company might lose its business opportunities. If the Company does not maintain the financial ratio as stated in the contract, the lender might request early payment. By entering the transaction, TRUE Group will be able to repay its loan and also negotiate with the lender to adjust the terms and conditions of the loan to match the cash flow of True Group. It will also enhance the capabilities of the Company to make new loan for asset expansion investment in the future. 8. The Telecom Infrastructure Fund establishment is the Company's long-term capital structure plan and connected to its telecommunication business structure plan. In Company s point of view, the Telecom Infrastructure Fund establishment will benefit to the country in the long term. By setting up the Fund (with the Fund manager to manage the fund and Asset manager to manage the asset), the Fund can buy telecommunication asset from other service provider and also lease the asset to other service provider. The telecommunication service provider and Thailand therefore can save its investment. The telecommunication industry of Thailand can grow more efficiently. 35

41 2.3 Cons of the transactions 1. The Company and its subsidiaries have obligations to pay for the lease and/or the right on the assets fees in the future. The Company and its subsidiaries (BFKT, Real Future, and TUC) have obligations to pay for the lease and/or the right on the assets fees in the approximate amount of 5,800 6,500 million baht annually (estimation in year ). After deducting the expenses and dividend received from the Fund, the Company still have net obligation to pay 4,000 4,400 million bath annually (sees the assumption and financial forecast under the reasonableness of the transaction in part 5). In case the Company and its subsidiaries unable to meet its obligations mentioned above, the Company might face risk of default on payment, certain amount of fees and/or future use of asset. 2. The Company may lose controls of utilizing the assets in the future. After the asset has been sold to the Fund, the ownership of the asset will be transfer to the Fund. Although the Company and its subsidiaries have long term lease contract on the asset, the Company may lose controls of utilizing the assets in the future. However, the Company predicted that under the terms and condition state in the lease agreement; the company s normal business operation will not be impact. 3. The Company must pay the taxes on the disposal of the asset. The Company and its subsidiaries have to pay tax at the approximate amount of 1,800 million baht. However the calculation of taxes will depend on the transactions, booking of the sale revenues, cost of assets, timing of transaction, and the use of taxes credit in each year of each company entering the transactions. (See details of assumption and financial estimation in part 4). However the amount of tax expenses from the profit from sale of asset in compare to the amount of revenues continuously gain from the asset is view as a single payment in compare to install the payment for several years. 4. The Company may lose lease incomes of the assets to other parties in the future and the Transactions may provide competition ability to existing and new telecommunication operators. The Fund might lease the asset to the existing service provider and new service provider. In the future the service provider have options to lease the asset from the Fund instead of invest large amount of money for its own asset. Therefore reduce investment cost and/or financial cost for the existing service provider in expanding its business. 36

42 For the new entry service provider, it will have option to lease the asset from the Fund instead of invest large amount of money for its own asset. It will save large amount of investment and therefore has make the telecommunication industry become more open to the new players. 2.4 Risk Factors 1. Risk from lease payment and/or the right on the assets fees in the future The Company and its subsidiaries (BKFT, Real Future, and TUC) have obligations to pay for the lease and/or the right on the assets fees at the approximate amount of 5,800 6,500 million baht annually (estimated figure of year ). After deducting the expenses and dividend received from the Fund, the Company still have net obligation to pay 4,000 4,400 million bath annually (see the assumption and financial forecast for reasonableness in entering the transaction). The Company and its subsidiaries, in case of inability to meet such obligation, are having risk of breaking an agreement with the Fund. 2. Risk from lose control and utilization of asset in the future. The Company, by sale of its telecommunication infrastructure asset to the Fund, will lose its ownership of the asset. Although the Company made long term lease agreement with the Fund, after the expiration of the agreement or changing of the management of the asset, the Company and its subsidiaries might lose the opportunities to utilize the asset. For an example, the Company might lose the option to manage the asset such as selling of the asset or cancel lease the lease of certain asset before the expiration of the agreement. 3. Risk from the asset maintenance quality. At present the Company s subsidiaries will manage the asset of the Fund, the Company face risk from the asset maintenance quality in case of changing Fund manager in the future or in case of there is more than one Fund manager. 4. Risk from unable to hand over and transfer 6,000 telecommunication towers. According to the agreement on sale of asset with the Fund, the Company will have to transfer 3,000 telecommunication towers in 2014 and another 3,000 telecommunication towers in The Company is therefore facing risk of unable to deliver 6,000 telecommunication towers within given period of time stated in the agreement. However, with the experience and expertise of the Company, the transfer of 6,000 telecommunication towers in the given time can be accomplishing. 5. Legal Risk in sale of the asset. In case CAT exercise the right, as stated in the Agreement, to buy telecommunication towers from TRUE, BFKT will have to acquire the amount of telecommunication towers for the Fund. The Company will receive money for the telecommunication towers at the price plus the additional rate as stated in the agreement, which expect to be higher than the cost of building new telecommunication towers. As such, in True Group s opinion, CAT, as a state owned enterprise, is unlikely to exercise the right. CAT will also have to find its own location to place telecommunication towers, which will create risk and increase cost to CAT. 37

43 However, if CAT decides to exercise the right, the Company is facing risk from acquiring telecommunication towers for the Fund to replace the existing telecommunication tower, which will be transfer to CAT. Although CAT will pay BFKT for the price of telecommunication towers, BFKT might have risk from paying the lease to the Fund without receiving lease from CAT until Risk regarding the NBTC s rule and regulation. The Fund by SCB Asset Management Company Limited has issued a letter to relevant government agencies regarding the requirement of a telecom license to operate the fund. If so, the cost to the Fund might increase according to the fees that shall be paid to NBTC. 2.5 Uses of the proceeds from the sale of assets The Company and its subsidiaries plan to use the proceeds from the sale of assets as follow: 1. Subscribe the Fund investment units in an aggregate amount of not less than 18 percent but not exceeding onethird of total number of investment units (repay short term loan that use to finance the investment in the investment unit). 2. Repay company s debt including loan, trade and other payable, and part of borrowing from others lender. 3. Pay the expenses and fees from the sale of asset and establishing the Fund 4. Reserve for taxes expenses such as corporate income tax from profit received from selling of assets and Value Added Tax collect from fund. 5. Reserve for future investment 6. Reserve for other working capital The Company and its subsidiaries plan to use the proceeds from the sale of assets is appropriate and beneficial to the Company s normal business operation. 2.6 Sources and Adequacy of Fund The Company has received short term loan (Bridging Loan) from one of the financial institution in Thailand to subscribe for no less than 18 percent but no more than one-third of the total number of investment units of the Fund. After the transaction is completed and the Company receives the proceeds from the transactions, the short term loan will be repaid. The amount of proceed to be receive from the transaction is more than the amount of the short term loan. 38

44 3. Valuation of the Transactions and its Conditions 3.1 Fair value of the disposed assets In order to the valuation of the Company s assets, the Independent Financial Advisor uses information from the Company s management and its public information. However, the opinion of the Independent Financial Advisor is based on the assumption that the information is correct and complete and on the current situation and data. Thus, if there is a material change, it can affect the Company s operations, the asset valuation, and its shareholders consideration. The Independent Financial Advisor has applied the 3 methods of valuation to evaluate the Company s assets as follow; 1. Book Value Approach 2. Discounted Cash Flow Approach 3. Book Building Approach for Market Demand (1) Book Value Approach The valuation approach considers the Company s asset value by using their book value at a point of time, which can be gathered from the book value of the assets in the Company s financial statement. According to the Company s financial statement as of June 30, 2013 together with the management information in the Notification account no. 2 and the management s book value evaluation at the transfer date, the asset book value is below. Remark: The transfer date is expected to be before the year end 2013 except the telecommunication towers of the Company and/or its subsidiaries that will be transferred in 2014 of 3,000 towers and in 2015 of 3,000 towers. The 6,000 telecommunication towers have an approximated value of 7,200 million baht (by using cost method, not market price) Data from the Company management as of September 1, 2013 Assets of Asia Wireless Communication Company Limited ( AWC ) Valuation of the book value at the transfer date Details of assets Book value (million baht) Telecommunication towers 4,650 Total book value 4,650 39

45 Assets of BFKT (Thailand) Company Limited ( BFKT ) Valuation of the book value at the transfer date Details of assets Book value (million baht) Telecommunication towers 1,661 FOC system and Broadband system 6,678 Total book value 8,339 Assets of The Company and/or its subsidiaries Valuation of the book value at the transfer date Details of assets Book value (million baht) Telecommunication towers 7,200 Total book value 7,200 Assets of True Universal Convergence Company Limited( TUC ) Valuation of the book value at the transfer date Details of assets Book value (million baht) FOC system and Broadband system 6,387 Total book value 6,387 Summary of asset details categorized by business types Valuation of the book value at the transfer date Details of assets Book value (million baht) Telecommunication towers 13,511 FOC system and Broadband system 13,065 Total book value 26,576 By using the Book Value method, the asset values equal 26,576 million baht. 40

46 2) Discounted Cash Flow Approach ( DCF Approach ) The DCF Approach will concern the Company s capability to generate revenues in the future from the Company s assets. It will calculate a present value of the Company s future cash flows by using an appropriate discount rate based on the assumption that the Company s assets can be used continuously (Going Concern Basis) and there is no material change happen under the current economic situation. The financial projection of the Company s assets is for considering the Company s asset fair price by using information and assumption given by the Company together with information gathered from the Company s management and staff under the current economic situation. However, if there is any material effect to the Company s operation and the assumption, the valuation of the Company s assets from the DCF method would be changed and the estimated price may not be used as a reference. Key factors for the Company s asset valuation by the DCF Approach are; 1. The valuation from the DCF Approach has an objective to determine the Company s asset fair price from the value of future cash flows generated from the assets. The future cash flows are the projection of the lease payment and right from lease revenues from the True Group and other telecommunication operators subtracted by the projection of the future expenses and investments, which the Company will enter into an agreement with the Fund regarding to the matters later. The assumption that the Independent Financial Advisor sets in the report does not consider the Company s book value or its cost. The estimated value of the DCF Approach only depends on the future cash flow from revenues, expenses, and investment. Therefore, for the Fund establishment and the transaction, the Company may alter any condition of revenues, expenses, and investment as the Company s management considers it proper with changes in market situation, surveys of institution investors requirements, and/or other factors such as legal issues, tax obligations, disputes with government agencies, etc. Thus, if there are changes in those factors, the asset valuation based on the DCF Approach may not reflect true values of the assets compared to the Book Building Approach for Market Demand which can reflect market situation and other factors during the transaction. 2. The Company s asset valuation is to find a fair value of the assets based on the Independent Financial Advisor analysis report for the disposal and acquisition of the Company s assets transaction which is categorized to be the Type 2 transaction. The analysis is for the Company s management and shareholders use in order to enter the transaction, thus, most information is based on the agreed assumption between the Company and the Independent Financial Advisor and the financial projection is also conducted by both the Company and the Independent Financial Advisor. 3. In the asset valuation, the telecommunication towers have the estimated value of million baht per telecommunication tower, which can be used as a market price for calculation of other analyses. 41

47 The estimated value of the assets and the major assumptions for revenue and expense structure According to the Asset and Revenue Sale and Transfer Agreement between the Company and the Telecom Infrastructure Fund, the telecommunication infrastructure assets of the Company and/or subsidiaries can separately be valued as follow; (1) The valuation of the True Group s telecommunication infrastructure assets (2) The valuation of the TUC s FOC system and broadband system and (3) The valuation of the BFKT s FOC system (sale and transfer of right to receive revenue from lease) Estimated book values of the transaction related assets at the transfer date (units: million baht) Company Telecommunication FOC and Broadband Total towers systems AWC 4,650 4,650 BFKT 1,661 6,678 8,339 The Company and/or its subsidiaries 7,200 7,200 TUC 6,387 6,387 Total 13,511 13,065 26,576 Estimated number of the transaction related assets at the transfer date AWC Company Telecommunication towers FOC and Broadband systems 4,360 towers BFKT 1,485 towers FOC and equipment 9,169 links Distance 47,250 kilometers The Company and/or its subsidiaries 6,000 towers TUC Core FOC distance 5,112kilometersand provincial broadband system1.20 million ports Total 11,845 towers FOC system 9,169 links with distance 47,250 kilometers and Core FOC distance 5,112kilometersand provincial broadband system1.20 million ports Remarks Transfer date estimated to be before year end 2013 except the telecommunication tower of The Company and/or its subsidiaries which will be transferred 3,000 towers in 2015 and 3,000 towers in 2016 The 6,000 telecommunication towers have an approximated value of 7,200 million baht (by using cost method, not market price) Data from the Company management as of September 1,

48 1. The valuation of the True Group s telecommunication infrastructure assets The Company is going to dispose the telecommunication towers to the Fund consisted of including towers on the ground, towers on roof tops, and Distributed Antenna System systems (DAS) nationwide. The telecommunication towers are in 77 provinces in Thailand and the towers in Bangkok Metropolitan are most condensed. The telecommunication towers are separated to 3 types; Overview of the telecommunication towers Companies Book Value (million baht) Number of towers Number of telecommunication towers by types on the ground on roof tops AWC 4,650 4,360 4, BFKT 1,661 1, The Company and/or its subsidiaries 7,200 6,000 4,161 1,839 - Total 13,511 11,845 9,088 2, Remark Time line to transfer the Company s and/or its subsidiaries telecommunication towers of 6,000 towers are; The telecommunication towers of 3,000 towers are transferred by December 31, 2014 The telecommunication towers of 3,000 towers are transferred by December 31, 2015 Time line to transfer the BFKT s telecommunication towers of 1,485 towers are; The telecommunication towers of 1,485 towers are transferred by August 31, 2025 The telecommunication towers of 1,485 towers may be transferred before August 31, 2025 if BFKT gets a consent from CAT Telecom before August 31, 2025 After the telecommunication towers of 1,485 towers and FOC system assets to the Fund, BFKT has a Call Option with the value of 10 million baht The lease of the telecommunication towers and/or slots on the telecommunication towers of the True Group Of the telecommunication towers that the Company and/or it subsidiaries dispose to the Fund, there are 1) The telecommunication towers of AWC and BFKT leased exclusively to BFKT for CAT Telecom service on 850 MHz. According to the transactions, AWC and BFKT will sale and transfer the right in future net income to the Fund for the period of 12 years. After that the Fund will leases the telecommunication towers of AWC and BFKT depend on the Slot as state in topic 2. 2) The telecommunication towers, total amount of 6,000 towers that True and/or its subsidiaries will transfer to the Fund. The Fund will leased to Real Future for its service on 2G 1800 MHz of TrueMove and 3G/4G 2100 MHz including part of BFKT for its services on 850 MHz and/or other telecommunication operators for uses of slots on the telecommunication towers. DAS 43

49 (million baht) NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES Estimate uses of Telecommunication towers (slots or towers) of 5,819 towers of AWC and BFKT Year Remarks Unit leased /2025 Lease of telecommunication towers 9/2025onward Lease of slots on telecommunication towers AWC s telecommunication towers BFKT s telecommunication 4,360 1,485 7,115 2,476 From 2013 to July 2025 lease the entire telecommunication towers From August 2025 lease slots on towers Total 5,819 9,591 telecommunication towers( slots per 1 telecommunication tower) Estimate use of Slot on Telecommunication towers of 6,000 towers of the Company and/or its subsidiaries (the 6,000 towers) Unit :Slots Services (Lessors) onward Year of lease end 1800MHz(TrueMove) - 3,000 6,000 6, (via Real Future) 850MHz(BFKT) - 2,273 4,589 4, (via Real Future) 2100MHz(Real Future) - 1,280 2,910 4, Others(via Real Future) Total - 6,619 13,993 15,249 Remark The above numbers are the minimum number that Real Future and BFKT will lease from the Fund. Assumption of the lease of the telecommunication towers and the slots on the towers to other operators Number of slots expected to be leased by other operators onward ,480 1,761 2,070 Summary of revenues from the telecommunication tower lease and/or slots on the towers 2013* Of AWC 288 1,151 1,142 1,134 1,125 1,115 1,106 1,096 1,086 1,075 1,064 1,053 1,172 1,402 1,444 Of BFKT The6, ,046 1,827 2,001 2,055 2,111 2,168 2,226 2,286 2,348 2,412 2,477 2,544 2,612 Others* Total 374 1,500 2,665 3,669 3,985 4,138 4,250 4,313 4,378 4,444 4,513 4,583 4,880 5,356 5,509 Remarks: *Between October December 2013 **Lease incomes of RF (Real Future) are accounting accrual 44

50 The lease price of the slots on the telecommunication towers The 2013 lease fee is referred from the present lease fees and Analysys Mason research on lease fees of slots in Thailand and other countries. The telecommunication towers are categorized to 3 types consisted of towers on the ground, towers on roof tops, and Distributed Antenna System, which have an estimated lease fee of 25,000 baht/slot/month in 2013 Telecommunication towers of AWC and BFKT AWC s telecommunication towers of 4,360 towers BFKT s telecommunication towers of 1,485 towers Lease rate (sale of right from revenues) /2025** 22,000 baht per tower per month (after deducting expenses such as land rent) 19,565 baht per tower per month (after deducting expenses such as land rent) 8/2025 onward** Based on the lease fee of slots of the 6,000 towers and other expenses The Company s and/or its subsidiaries telecommunication towers of 6,000 towers (baht/slot/month) from towers on the ground 25,400 25,400 Assumed to 2. towers on roof tops 23,200 23,200 increase 2.7% a 3. Distributed Antenna System 39,400* 39,400* year Remark: The lease fee is referred from the present lease fees and Analysys Mason research *Slot lease fees of DAS are not used for calculating the 6,000 telecommunication towers but used for the calculation of the DAS lease fee of BFKT and AWC after 9/2025. o The slot lease fee after deducting the operating and maintenance (O&M) expenses is 325 baht per tower per month and the fee is before the slot lease fee discount. o The fee of 19,565 baht/tower/month of the BFKT s 1,485 towers or equal to 29,871 baht/tower/month deducted by expenses such as area/land rent and tax provision (9,981 baht/tower/month) and deducted the O&M 325 baht/tower/month. The expenses (without tax provision) are assumed to increase 3% a year starts 2015 onward (sale of right to receive revenue from lease rate until2025). o The fee of 22,000 baht/tower/month of the AWC s 4,360 towers or equal to 28,595 baht/tower/month deducted by expenses such as area/land rent and tax provision (6,270 baht/tower/month) and deducted the O&M 325 baht/tower/month. The expenses (without tax provision) are assumed to increase 3% a year starts 2015 onward (sale of right to receive revenue from lease rate until 2025). o In the year 2025, the number of months of the right on the BFKT and AWC s telecommunication tower lease revenues is 7 months and the number of months of the BFKT and AWC s slots on the towers is 5 months. The slot lease fee discount There are 2 slot lease fee discount on the slot lease agreement, which are; (1) The Founder Tenant Discount is for the True Group who developed all towers and systems and for the Anchor Tenant. The discount is 30% of the normal lease fee. 45

51 (2) The Volume Discount is for a tenant who leases large number of slots. The discount rates are as follows; Number of leased slots Discount(%) 1 3,001 Slots 0% 3,002 5,001 Slots 30% 5,002 10,001 Slots 35% More than10,001slots 40% Area/Land Rent The telecommunication towers acquired by the Fund are on the ground, buildings, or other areas under the area/land rent agreements (some granted permission by government agencies). The 2013 rent fees are referred from the current fees in the agreements as follow; The Company s and/or its subsidiaries 6,000 telecommunication towers (unit: baht/month) onward 1. towers on the ground 4,708 4,849 Increase 3% per year 2. towers on roof tops 14,809 15, DAS 7,611 7,839 Remark: * The rents do not include property tax of 12.5% of the rents The BFKT s and AWC s telecommunication towers (unit: baht/month) onward Average of all types of telecommunication towers Calculated from lease rate in year 2013 at approximately 7,500 baht per month, which used as the base rent. The lease rate in year 2025 will be 10,382 baht. Increase 3% per year Remark: * The rents do not include property tax of 12.5% of the rents The rents are inflated every year according to expected inflation in Thailand with the rate of 3% per year and remained unchanged during the projection. (unit :million baht) 2013* Rents 1. Towers of AWC and BFKT Towers of the increase3% Company and/or its per year subsidiaries Total ,098 1,575 1,622 Property tax of 12.5% Remark: *Between October December

52 The operating and maintenance (O&M) Anchor Tenants or the True Group will be responsible for maintenance the telecommunication towers and its slots. The O&M expenses are based on the present O&M expenses of 325 baht per tower per month (already included in lease rate/right to lease). Insurance premium and other expenses Insurance premium is calculated from % of the insured value of 11,845 million baht or the value of 1 million baht per telecommunication tower of the 11,845 telecommunication towers without any increase or decrease along the transaction. Other expenses include the fixed cost of 2 million baht and the commissions for finding other operators to lease the towers of 5% (unit :million 2013* baht) Insurance premium approx.11 Other expenses approx.3 Remark: *Between October December 2013 Capital Expenditure There is no additional investment in telecommunication towers in the assumption because the O&M expenses are already in the assumption each year. Table of present values of given discount rates (from 1 baht) Discount Factor /Years % % %

53 Summary of cash flows from the lease of the telecommunication towers AWC (sale and transfer of right to receive revenue from lease) (THB MM) 2013* Lease Rev ,151 1,142 1,134 1,125 1,115 1,106 1,096 1,086 1,075 1,064 1,053 1,172 1,402 1,444 Rent (222) (559) (576) Tax (28) (70) (72) Insurance (1) (4) (4) Net total 288 1,151 1,142 1,134 1,125 1,115 1,106 1,096 1,086 1,075 1,064 1, BFKT(sale and transfer of right to receive revenue from lease) (THB MM) 2013* Lease Rev Rent (76) (191) (196) Tax (9) (24) (25) Insurance (0) (1) (1) Net total The Company s and/or its subsidiaries for 6,000 towers (THB MM) 2013* Lease Rev ,046 1,827 2,001 2,055 2,111 2,168 2,226 2,286 2,348 2,412 2,477 2,544 2,612 Rent 0 0 (336) (614) (632) (651) (671) (691) (712) (733) (755) (778) (801) (825) (850) Tax 0 0 (42) (77) (79) (81) (84) (86) (89) (92) (94) (97) (100) (103) (106) Insurance 0 0 (2) (4) (4) (4) (5) (5) (5) (5) (5) (5) (4) (5) (6) Net total ,132 1,285 1,318 1,351 1,386 1,421 1,457 1,494 1,531 1,571 1,610 1,651 Adjusted 0 1, (117) (120) (123) (126) (130) (133) (137) (141) (144) (148) (152) Cash flow 0 1,046 1,083 1,140 1,169 1,198 1,228 1,259 1,291 1,323 1,357 1,391 1,427 1,462 1,498 Other operators (THB MM) 2013* Lease Rev Expenses 0 0 (9) (14) (10) (8) (6) (3) (3) (3) (3) (3) (3) (3) (3) Net total Total telecommunication tower business (Net Cash Flows) (THB MM) 2013* AWC towers 288 1,151 1,142 1,134 1,125 1,115 1,106 1,096 1,086 1,075 1,064 1, BFKT towers ,000 towers 0 1,046 1,083 1,140 1,169 1,198 1,228 1,259 1,291 1,323 1,357 1,391 1,427 1,462 1,498 Others Total 374 2,545 2,694 2,969 3,143 3,273 3,362 3,402 3,439 3,478 3,518 3,559 3,492 3,422 3,517 Remark: *Between October December

54 Total value of the telecommunication towers Present value of the cash flows between the year and the Terminal Value Case1 Discount rate at WACC of 8.00% million baht NPV of cash Terminal Value Total value Number of towers Total value per flows tower AWC towers 8,968 2,643 11,610 4, BFKT towers 2,717 1,106 3,823 1, The6,000 towers 9,990 5,004 14,993 6, Other operators 4,453 2,994 7,446 11, Total 26,127 11,746 37,873 11, Remark : Terminal Value has a perpetual assumption with the discount rate of 10% and the growth of 0%. Case2: Discount rate at WACC of 8.50% million baht NPV of cash Terminal Value Total value Number of towers Total value per flows tower AWC towers 8,723 2,474 11,197 4, BFKT towers 2,641 1,036 3,677 1, The6,000 towers 9,676 4,685 14,361 6, Other operators 4,283 2,803 7,086 11, Total 25,323 10,998 36,321 11, Remark :Terminal Value has a perpetual assumption with the discount rate of 10% and the growth of 0%. Case3: Discount rate at WACC of 9.00% million baht NPV of cash Terminal Value Total value Number of towers Total value per flows tower AWC towers 8,489 2,317 10,806 4, BFKT towers 2, ,538 1, The6,000 towers 9,377 4,388 13,764 6, Other operators 4,122 2,625 6,747 11, Total 24,556 10,301 34,857 11, Remark :Terminal Value has a perpetual assumption with the discount rate of 10% and the growth of 0%. Value of the telecommunication towers is approximately 35,000 38,000 million baht. (The value of each telecommunication tower is approximately 2.50 million baht without leases from other operators and 3.00 million baht with the leases from other operators). 49

55 The financial analysis of the telecommunication tower business Number of telecommunication towers Towers AWC 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 BFKT 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 1,485 6,000 towers 0 0 3,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 Total 5,845 5,845 8,845 11,845 11,845 11,845 11,845 11,845 11,845 11,845 11,845 11,845 11,845 11,845 11,845 Net revenues of the telecommunication towers (baht/tower/month) Baht AWC 22,000 22,000 21,837 21,668 21,495 21,317 21,134 20,944 20,750 20,549 20,342 20,130 17,619 14,683 15,124 BFKT 19,301 19,565 19,301 19,028 18,748 18,459 18,161 17,855 17,539 17,214 16,879 16,534 16,745 18,048 18,590 6,000 towers 18,479 15,716 17,854 18,306 18,770 19,245 19,733 20,232 20,745 21,270 21,821 22,359 22,925 Average 21,314 21,381 20,272 18,322 19,306 19,434 19,564 19,697 19,832 19,971 20,112 20,256 19,638 18,993 19,510 Other operators 3,456 4,944 7,154 8,761 9,786 10,117 10,422 10,735 11,058 11,391 11,733 12,086 12,449 Total 21,314 21,381 21,444 20,826 22,930 23,871 24,521 24,821 25,111 25,408 25,713 26,026 25,581 25,115 25,816 50

56 Valuation analysis of the annual cash flows from the types of the telecommunication towers According to the graph of the net revenues (baht/tower/month) of each type of the telecommunication towers, the net revenue cash flows of the 6,000 telecommunication towers will increase every year (except the second year) from 20,000 baht/tower/month to 23,000 baht/tower/month. However, the net revenue cash flows of the BFKT s and AWC s telecommunication towers have a downward trend due to the increase of the expense assumptions and after 2025, when the tower lease payment is converted to the slot lease, the net revenue cash flows of will experience an upward trend. Terminal value analysis of the types of the telecommunication towers The lease fee of each slot on the telecommunication towers per month in 2027 Number of towers (towers) Number of leased slots in 2027 Slot to tower area ratio (slots/towers) Fee / Slot Lease fee (baht per Slot per month) Anchor discount Volume discount Net fee / Slot AWC towers 4,360 7, ,479 (11,077) (8,495) 16,908 BFKT towers 1,485 2, ,198 (11,077) (8,495) 18,627 The 6,000 towers 6,000 15, ,969 (10,491) (10,203) 14,276 The lease fee of each telecommunication tower per month in 2027 before the related expenses. Number of towers (towers) Net fee / Slot (baht per Slot per month) Slot to tower area ratio (slots/towers) Net fee/ tower (baht per tower per month) AWC towers 4,360 16, ,592 BFKT towers 1,485 18, ,057 The6,000 towers 6,000 14, ,281 The lease fee of each telecommunication tower per month in 2027 after the related expenses. Number of towers (towers) Slot to tower area ratio (slots/towers) Net fee / tower Lease fee(baht per tower per month) Rent / tower Anchor discount Volume discount Net fee / tower AWC towers 4, ,592 (11,014) (1,377) (77) 15,124 BFKT towers 1, ,057 (11,014) (1,377) (77) 18,590 The6,000 towers 6, ,281 (11,804) (1,476) (77) 22,925 According to the tables above, the slot lease fee of BFKT s and AWC s telecommunication towers is 36,479 38,198 baht/slot/month greater than the 6,000 telecommunication towers of 34,969 baht/slot/month. However, the slots to tower ratio of the 6,000 towers is 2.54 slots per tower higher than the ratio of the BFKT s and AWC s telecommunication towers of 1.67 and 1.63 slots per tower, respectively. 51

57 As the result, the net revenue cash flow in 2027 (the year to calculate the Terminal Value) of the 6,000 towers (22,925 baht per tower per month) is greater than those of AWC and BFKT (15,124 18,590 baht per tower per month) Summary of the telecommunication tower of each company (Case 1 Discount rate at WACC of 8.00%) Cash Flow value Total AWC Towers BFKT Towers News Telecom Towers Remark: Exclude slot lease fee from other operators (approximately 0.63 million baht per telecommunication tower) The net cash flows of AWC s and BFKT s will be higher than the net cash flows of the 6,000 towers but the Terminal values of the 6,000 towers will be higher than the net cash flows of AWC s and BFKT s due to the better slot to tower ratio. In conclusion, the estimated values of the 3 types of AWC, BFKT, and the 6,000 towers are similarly around million baht per tower. The valuation does not include the lease fee from other operators of approximately 0.63 million baht per tower. If we include the lease fee from other operators, the total value of each telecommunication tower will be3.20 million baht per tower (with the discount rate at WACC of 8.00%). 52