Optus owner SingTel and its owner Temasek face a giant headache in Thailand where their move to take control of number one cellco AIS has set off a chain reaction culminating in one of that nation’s worst ever political crises.

Temasek took control of AIS and other Shin Corporation assets such as IPSTAR last month from majority interests associated with the family and in-laws of Thai Prime Minister Thaksin Shinawatra. SingTel already held a sizable minority stake in AIS. The transaction sparked off a national outrage – the deal was enacted through a series of complicated off-shore and holding company structures apparently designed to evade foreign ownership and other financial regulatory obligations; the US$1.9b sale was tax-free under legal loopholes; and there were also criticisms that a Thai prime minister was effectively selling out national radio frequency assets to a foreign government (Temasek is the Singapore government’s investment agency).

The controversy has already prompted Thailand’s securities regulator to charge Thaksin’s son with disclosure violations, while the telecom regulator said it was investigating to see if the Temasek acquisition violated the 2001 Telecommunications Act. Over the past few weeks, a series of intensifying rallies and public rebukes from former allies – including the resignation of the communications minister from both his position and the party – have forced Thaksin on the backfoot.

Thaksin decided to retake the initiative last week by calling a snap election to catch his opponents on the hop – the three largest opposition parties responded yesterday by boycotting the election, leaving Thais to wonder what might happen next. Even if Thaksin’s Thai Rak Thai party was to win the overall election uncontested, it might fail to meet the requirement that successful candidates must receive the votes of at least 20% of residents in their electorate to enter parliament– a problem in Opposition strongholds such as Bangkok and southern Thailand. Some fear that the coming political and constitutional crisis may lead to civil breakdown and, perhaps, a military coup. The Thai military went to the extraordinary extent of denying any intention to launch a coup yesterday afternoon.

At the very least, Temasek/SingTel’s Thai assets can be expected to take a massive reputation and brand beating given that nearly one third of all Thais use their services. The very notion that a US$1.9b share sale be tax free is galling for Thais, many of who earn less than A$10 a day. AIS has 16m customers, while millions more watch Shin’s national ITV television network. The whole affair also raises serious questions about the poor judgement and foresight of Shin’s Singaporean acquirers.