All operating contracts declared illegal; renegotiations to start from scratch

22 May 2007

The operating contracts of all private mobile phone network providers in Thailand have been ruled illegal under a decision by the Council of State which stated that changes made to concessions between private operators and state-owned TOT and CAT Telecom had failed to meet requirements under the 1992 joint public-private investment law. However, ICT Minister Sitthichai Pookaiyaudom stressed that services will not be interrupted even though all contracts must be renegotiated from scratch, which he said could be completed before the military-backed interim government is scheduled to hold elections – expected by October. The decision was expected by GSM cellcos AIS, DTAC and True Move, which offer services under build-transfer-operate (BTO) concessions, and private-public joint venture Hutchison CAT Wireless Multimedia – as the regime had already declared the contracts illegal before asking the Council of State for a ruling. There will be no move to freeze or cancel the concessions, in order to avoid disruption to services, Dr Sitthichai claimed, although the ruling technically allows it. The ruling leaves open the possibility that recent amendments, which included changes in revenue-sharing terms and concession lifespans, could be made void. The Minister called on the operators to enter into talks on restructuring their contracts to create a level playing field under a single, unified framework. Sitthichai said he expected the negotiations between the two state enterprises and private operators to take around 90 days, after which the cabinet would review the proposals. ‘We expect the entire process to be completed within 180 days,’ he said, adding that: ‘It’s my dream that all concession contracts be made the same. In reality of course, that might not be the case. But at least, each player will pay 30% in revenue sharing [to network hosts TOT or CAT].’ He went on to say that he would propose that authorities move forward with converting existing concession contracts altogether to truly create a competitive landscape, where concessions are scrapped in favour of new licensing agreements. DTAC and True Move, which operate under CAT Telecom concessions, pay the state enterprise 25% of their revenue, a sum that will increase to 30% from 2011, whilst AIS, which operates under a TOT contract, pays 20% of its pre-paid service revenues. Commenting on the upcoming negotiations, DTAC has suggested that AIS’s pre-paid rates be increased to 25% now and 30% in 2011 to bring them to comparable levels.