Temasek Towers stands tall in the financial district of Shenton Way in Singapore
© AFP/File Roslan Rahman

BANGKOK (AFP) - The investigation is the latest fallout from the decision by Prime Minister Thaksin Shinawatra's family to sell their 49 percent stake in the company he founded for a tax-free 1.9 billion dollars in January.

The deal sparked months of street of protests and plunged Thailand into political turmoil that has yet to end, after the courts invalidated snap elections held in April.

A team of investigators from the commerce ministry Wednesday began examining the findings of a preliminary probe, which found that a Thai company called Kularb Kaew was formed by a group of Thai investors to illegally buy and control Shin Corp shares on behalf of Temasek.

If the latest investigation confirms that finding, Temasek's stake in Shin would exceed foreign ownership limits, which would restrict the company's eligibility for telecom licenses.

"We will need a couple more months to rule on whether the Shin Corp deal must be nullified or not," deputy permanent secretary for commerce Yanyong Phuangrach told reporters.

"More information will be sought from other firms involved in the transaction as well as the Democrat Party and those who filed the complaint in this case," he said.

If investigators find any wrongdoing, the case would be brought to the police who could then take it to a court. The court would consider possible remedies, including nullification or restructuring of the deal, Yanyong said.

The opposition Democrat Party brought the case, one of two investigations into the complex deal.

Regulators at the Securities and Exchange Commission are examining different aspects of the deal, including claims of insider trading.

The party accused the Commerce Ministry of dragging its feet on the investigation, saying the preliminary findings should be enough to take action.

"The initial investigation already proved ground that somebody holds a stake in Shin Corp on behalf of Temasek. I don't see any reason for the commerce ministry to spend more time on it," Korn Chatikavanij, head of the Democrats' economic team, told AFP.

"It is clear that politics is delaying the process so that the final decision doesn't come before the new general election" set for October 15, he said.

After buying Thaksin's family's stake, Temasek later increased its total holding in the company to 96 percent through a mandatory tender offer.

Shin holds nearly 43 percent of Advance Info Service (AIS), Thailand's largest mobile operator, and controlling stakes in iTV and Shin Satellite, which all have telecom licenses or concessions given by the Thai government.

The company could lose those licenses if Shin Corp were found to be a foreign-controlled company.

Kavee Chukitkasem, a senior analyst at Capital Nomura Securities, said the investigation of Shin Corp is critical to investor confidence.

"It is a very sensitive case. The results will have a significant impact on foreigners investing in Thailand as well as consumers who are clients of Shin Corp's mobile phone or satellite businesses," he told AFP.

"In the worse-case scenario, if the licenses of those companies are terminated, how will the government protect the interests of users and minority shareholders?"

Kavee said he expected the government to find a compromise solution by restructuring the deal to comply with Thai laws.

Due mainly to the investigation, Shin Corp's share price lost 1.50 to 30.50 baht on Wednesday while AIS dropped 2.00 to 91.00, draggging down the overall telecom sector by 2.1 percent.

©AFP