Singtel's Thai associate AIS receives TOT 70b baht claim, applies for arbitration

TELCO Singtel's Thai associate Advanced Info Service Public Company Ltd (AIS) is taking to arbitration a claim for 70 billion baht (S$2.7 billion) from Thai state-owned telco TOT Public Company Ltd relating to alleged unlawful contract amendments dating back to 2001 and 2002 on the reduction of revenue sharing in prepaid and roaming expenses.

The claim was received on Sept 30, 2015 and AIS has already sent back a letter refuting the claim and submitted the claim for arbitration, AIS CEO Somchai Lertsutiwong said in a letter disclosed by Singtel on Thursday morning.

"The company strongly confirms that the amendments to the agreement were made correctly, faithfully, and with the consent of both parties. The amendment has been valid and binding to the contractual parties and there was neither rejection nor revocation of the amendment raised by TOT until the expiry of the agreement on Sept 30, 2015," he said in the letter, translated to English from Thai. "The company then has no responsibility to pay such a claim to TOT."

The TOT claim dates back many years. AIS and its parent, Shin Corp, were founded by former Thai prime minister Thaksin Shinawatra, who was ousted in a coup in 2006. The sale of Shin Corp to Temasek Holdings that year had caused much controversy in Thailand.

A Thai court subsequently ruled that Mr Thaksin had influenced changes to the telco concessions that sharply cut TOT's share of profits under joint-venture agreements. The Thaksin government had brought in an excise tax in the telco sector that changed how AIS and other operators paid concession fees to the government. The tax reduced the revenue AIS had to share with TOT from its prepaid services.

TOT had demanded various payments from AIS through the years, Singtel said in disclosures made in its latest annual report. Various cases are pending arbitration.

The latest claim comes after Thailand's military government asked TOT to seek the compensation from AIS before the concession contract expired on Sept 30, said a Reuters story on Sept 28. TOT could be charged with neglect of duty otherwise, the story added.

Singtel closed at S$3.60 on Wednesday, up five cents.