TOT and CAT to invade each others’ turf

20 Nov 2003

Thailand’s government yesterday gave the country’s two monopoly operators -TOT Corporation, which operates in the local and long-distance markets, and CAT Telecom, which provides international telephony services – free reign to operate in each others’ markets, a move which it claims will prepare them to cope with fiercer competition in the future and boost fixed line penetration, which stood at less than 12% at the end of 2002 . However, analysts have expressed concerns that the move could have an adverse effect on both companies, weakening their shares and setting them up for takeovers. It is widely believed that while TOT could possibly compete with CAT in the international calls market, CAT will find it difficult to enter TOT’s arena, as it will need to build a domestic fixed line network, meaning that it would be faced with huge costs.

Moreover, the government has suggested that TOT increase its 52% stake in the operators’ joint venture Thai Mobile, in a bid to boost the cellco’s performance, which has only attracted 150,000 subscribers in its first year of operations. The government said that CAT should focus on its cellular joint venture with Hutchison Telecom, Hutchison-CAT, leaving TOT to take control of Thai Mobile. The share swap is likely to go ahead either with CAT diluting its stake to less than 25% through a capital injection or with TOT directly buying part of CAT’s holding.

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