Christmas Reflections

When I was younger, December and the coming January would seamlessly flow and blend into each other as my birthday follows Christmas

other, GMM Grammy, shut down its pay-TV operations in February.

Fox, the Hong-Kong based international arm of 21st Century Fox, said on Dec. 14 that it has commenced legal action in Thai and Hong Kong courts against the two operators and Bangkok Bank.

Fox’s action serves as a fresh reminder of the stiff competition facing operators in Thailand’s overcrowded TV industry. It also highlights the default risks facing the lenders that have backed them.

“Paying for what is guaranteed in a bank guarantee is a normal international tradition and it is unbelievable that Bangkok Bank is not respecting that,” Zubin Gandevia, Fox’s president for the Asia-Pacific and Middle East, told the Nikkei Asian Review. Fox said it has sent over 20 letters to Bangkok Bank requesting payment but has received no response.

Hours after Fox’s announcement of legal action, Bangkok Bank released a statement saying that “CTH has now instructed Bangkok Bank not to make payment as demanded because Fox Networks Group Asia was at fault for breaching the contract.” The bank did not explain how the contract was supposedly breached or provide any further detail.

According to Fox, CTH owes the company $21 million, and GMM Grammy owes $50 million. Since 2013 the two operators have held separate five-year licensing agreements with Fox to broadcast content in Thailand. Bangkok Bank had issued full bank guarantees for both.

The pay-TV market in Thailand has long been dominated by True Visions, the cable TV arm of local telecommunication service provider True Corp. The two new rivals have been unable to eat into True’s share, despite boasting international entertainment and sports content, including Premier League soccer.

Moreover, in late 2013, the government held an auction for the nation’s first free-to-view digital TV service, awarding 24 new licenses. The auction raised roughly $1.46 billion for government coffers, but for companies, it only meant tougher competition.

“We are a nation with a population of just 66 million,” an industry analyst at CIMB Securities (Thailand) said. Thailand already had six analog terrestrial channels, and “the viewer base and advertisement market is too small for so many operators,” the analyst said.

Most of the new digital TV operators are making losses. Those struggling to pay off their auction fees have called on the telecom regulator to relax payment conditions. Two have already gone out of business.

DEFAULT RISK Among lenders, Bangkok Bank could be facing the largest default risk, having put up guarantees for 14 of the 24 new operators. The total value of these guarantees is more than $600 million, nearly equivalent to the bank’s net profit of 23.5 billion baht ($658 million) for the nine months through September.

Earlier this year, the bank received a warning from the telecom regulator for failing to make payments on behalf of cash-strapped Thai TV, which folded in February. The bank eventually paid the overdue installment of the TV operator’s auction fees, plus interest for the delay, and set aside provisions for the remaining installments. Altogether, these payments will set the bank back 1.7 billion baht.

“The bank had issued bank guarantees to three TV operators that failed in such a short period of time, which raises questions on its due diligence process,” Fox’s Gandevia said.

Passakorn Linmaneechote, a banking analyst with Macquarie Securities, said further defaults are inevitable but added that Bangkok Bank probably will not have to shoulder all the responsibility. “The remaining


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