Finance Ministry, MICT and PM push to scrap 2G BTO concessions this year

20 Jul 2010

Thailand’s Ministries of Finance and Information & Communications Technology (MICT), with the backing of the prime minister, yesterday agreed to push ahead with a plan to convert all existing 2G mobile network operating concessions based on build-transfer-operate (BTO) terms by the end of this year and issue new full licences to ensure a level competitive playing field. The BTO concessions issued by state-run telcos TOT – to cellular market leader by subscribers AIS – and CAT Telecom – to DTAC and True Move – are based on varying terms and require the privately-owned cellcos to share a proportion of revenues ranging between 25% and 30% with their network ‘hosts’. AIS has five years remaining on its concession, second-ranked DTAC eight years left and True Move three. Revenue-sharing accounts for a large proportion of both CAT and TOT’s overall earnings, a fact which has been a major obstacle over the years to reforming the sector.

The country’s Council of Economic Ministers has approved a proposal by Finance Minister Korn Chatikavanij to terminate the BTO agreements and award all three operators 15-year full licences with fees set at 12.5% of revenues, payable to the state. Following this move, Dow Jones Newswires reports that a special committee is being formed comprising representatives from the Ministry of Finance, the MICT and industry experts to consider the most practical way to pursue the licence conversion, which will report to the cabinet within one month, according to Korn. Once the committee finalises its proposal, the government will discuss it with the sector’s independent regulator the National Telecommunications Commission (NTC) and operators. ‘We won’t be able to [convert the concessions] if the private sector fails to agree with the plan,’ said Korn.

The government has attempted to calm persistent fears that the 2G conversion plan will derail the 3G licensing schedule of the NTC, which expects to auction three 3G/4G full mobile concessions in the 2100MHz band in September. However, Korn added that some details of the 3G licensing regulations may need to be amended to accommodate the 2G proposals. ‘Whether the 3G auction would be delayed will rest on a decision by the NTC. In case there is to be a delay, it would only be a matter of months,’ Korn claimed. NTC commissioner Natee Sukonrat, speaking to Dow Jones, argued, ‘It’s two separate issues. I don’t think [the government’s 2G plans] would affect our [3G auction] timeline.’ An industry source quoted by the Bangkok Post said that the Ministry of Finance wants the NTC to set 3G licence fees at 12.5% of revenues – in line with the proposed level for 2G permits – doubling the 6% proposed earlier – ‘to prevent operators from migrating customers from 2G to 3G [just to save on fees].’ However the source added that the NTC had made it clear that it would not change the licence fee, and also reiterated that only a court could order it to halt the September 3G auction. Meanwhile, PM Abhisit Vejjajiva has also called a meeting with the NTC to discuss the issues surrounding 2G and 3G licensing.