Pinsents and HSF’s US links pay off in $7.5bn telecoms deal

Herbert Smith Freehills (HSF) and Pinsent Masons have teamed up with firms in the US on a complex $7.5bn deal between telecoms companies CommScope and Arris.

The transaction will see network equipment provider CommScope buy software maker Arris, a fellow US-headquartered that is listed on the NASDAQ.

Pinsents London partners Rob Hutchings and Roberta Markovina advised CommScope on UK M&A matters, while partner Eloise Walker supported on tax.

The firm worked alongside Alston & Bird partners Mark Kelly and William Snyder, who led on US elements of the transaction. Latham & Watkins and Skadden Arps Slate Meagher & Flom also played key roles for CommScope and are understood to have advised on financing issues.

The target Arris was represented by a trio of partners from HSF’s corporate group in London; Gavin Davies, Alex Kay and Caroline Rae. The firm also led on tax advice for the company, with global head Isaac Zailer on call.

HSF was brought in by Troutman Sanders to work on UK aspects of the transaction, while the US firm led on matters overseas with Atlanta-based Brink Dickerson.

Hogan Lovells is understood to have advised on antitrust issues for Arris.

In connection with the acquisition, the Carlyle Group has also re-established an ownership position in CommScope through a $1bn minority equity investment. Cravath Swaine & Moore M&A partners Keith Hallam and Jenny Hochenberg advised CommScope on this specific part of the deal, while Simpson Thacher & Bartlett won the role for Carlyle.

CommScope’s CEO Eddie Edwards said: “CommScope and Arris will bring together a unique set of complementary assets and capabilities that enable end-to-end wired and wireless communications infrastructure solutions that neither company could otherwise achieve on its own. We will access new and growing markets, and have greater technology, solutions and employee talent that will provide additional value and benefit to our customers and partners.”


Types of Telecommunications Business License in Thailand

The Telecommunications Business Act B.E. 2544 (2001) (“TBA”) provides that a person operating a telecommunications service in Thailand is required to obtain a license. “Telecommunications Service” is defined under the Act on the Organization to Assign Radio Frequency and to Regulate Broadcasting and Telecommunications Services B.E. 2553 (2010) as:

 “A service which provides the emission, transmission or reception of signs, signals, writing, digits, images, sounds, codes, or intelligence of any nature by means of Hertzian, wire, optical, electromagnetic, or any other system, or a combination thereof, and shall include satellite communication services or other business prescribed as telecommunications services by the NBTC, but not including sound broadcasting, television broadcasting, and radio communication services”.

A person is considered as operating a “Telecommunications Business” if the nature of the business is to supply Telecommunications Services to other persons. Although the definitions are closely related, “Telecommunications Business” has a wider meaning than Telecommunications Service as the regulator is required to look into the “nature” of the business in order to determine if it is a Telecommunication Service. If the business is deemed to be a Telecommunications Business, then a license is required from the National Broadcasting & Telecommunications Commission (“NBTC”).

The NBTC’s Notification Re: Telecom Network Access and Interconnection B.E. 2556 (2013) (the “Notification”) imposes duties on licensees who own telecommunications networks, such as allowing other licensees to interconnect with their own network on a fair, reasonable, and non-discriminatory basis. Licensees with a network shall submit a Reference Interconnection Offer (RIO) along with relevant supporting documentation that shows the principle and method for calculating interconnection charges to the NBTC for its review. The Notification also provides guidelines for contractual arrangement as well as dispute resolution procedures in case of refusal of network access or interconnection.

Pursuant to the TBA, three types of telecommunications license are issued to operators in Thailand: Type I, Type II, and Type III. Each license has different requirements, rules, and obligations that reflect the status of the operator. Each type of telecommunications license is further subdivided into either a license to operate a telecommunications service or a license to operate an internet service. The criteria and requirements, however, are the same for both. The details below also apply to both types of service.

Type I licenses are for telecommunications operators who do not own a telecommunications network and whose business does not have an impact on fair competition. A Type I license is issued after the operator files an application. The TBA does not impose foreign ownership restrictions on Type I licensed operators; however, foreign nationals or companies with a majority of foreign shareholders are subject to general laws on foreign business and are required obtain a Foreign Business License from the Ministry of Commerce in order to operate their business.

Type II licenses are granted to operators who, either with or without a telecommunications network, provide services (or who lease out their network to operators who provide services) to a limited group of people, or services that cause no significant impact on fair competition, the public interest, or consumers. This type of license is typically issued to operators who provide services exclusively to large organizations whose business operations are spread across a wide geographic area. Type II licensed applicants must fulfill all criteria as prescribed by the NBTC prior to applying. A call-back/call re-origination service is one example of a Type II licensed business. The TBA prescribes that Type II licensed operators must be Thai or a company in which more than 50% of the total issued shares are held by Thai shareholders.

Type III licenses are granted to operators who possess a telecommunications network and provide services (or who lease out their network to other operators who provide services) to the general public, or services that cause a significant impact on fair competition, the public interest, or require special consumer protection. Telecommunications Services that fall under a Type III license include public switched telecommunications services, integrated services digital networks, public cellular mobile telephone networks, and public mobile data services. The TBA prescribes that Type III licensed operators must be Thai or a company in which more than 50% of the total issued shares are held by Thai shareholders.

Only operators who obtain a Type III license may operate a telecommunications network to provide international private leased circuit (IPLC) services and/or international internet gateway services. In this regard, the Type III licensed operator must also obtain an additional IPLC and/or IIG license (as the case may be). Although a Type I licensed operator cannot by itself operate the IPLC or IIG service, it may purchase these services from an IPLC/IIG licensed operator and resell the same to its customers under its own name.

For the purposes of definition, “Telecommunications Network” means the set of telecommunications equipment that is directly connected or connected through switching equipment or any other equipment for telecommunications between defined termination points by means of any wire, radio-frequency spectrum, optical, or any other electromagnetic system or combination thereof.

Each type of license is subject to different regulations and controls over business operations, from license acquisition to operator conduct. This is in recognition of the fact that different licensees possess different types of networks and equipment. Trade competition also plays a factor in the level of oversight of an operator by the regulator.

In summary, the TBA differentiates Telecommunications Business operators by network possession, the purpose of services, and impact on consumers. In order to help stabilize the various Telecommunications Services offered by operators, the regulator imposes different obligations on Telecommunications Business licensees, with the intention of facilitating network access and encouraging freer and fairer competition in the Thai telecoms sector.