AIS «forced» into overpriced $2.1b 900-MHz

23 May 2016

In a sane, rational world, there would be no reason for AIS to go ahead and participate in the upcoming $2.1b 900-MHz auction. Thailand only has three functioning telcos. Dtac has long said it would not compete unless the starting price is much lower. TrueMove, after much controversy, decided it would not take part, leaving only AIS to bid at a starting bid of $2.1 billion (75 billion baht).

In the auction last December, the reserve price for one 10-MHz licence on the 900-MHz band was just $361 million (12 billion vaht). Jasmine bid it up to $2.1 billion and then defaulted, blaming its Chinese partners for being tardy, hence the re-auction scheduled for 27 May with a starting price at Jas’ winning bid.

AIS could have simply walked away and waited for the regulator to re-auction the spectrum after dealing with the aftermath and in doing so save its shareholders a billion dollars, give or take, along the way.

But Thailand is special. Foreigners do not understand how Thailand works and one cannot apply foreign standards to the country be it in democracy, rule or law, or business.

In this case, newspapers have quoted unnamed sources in the government saying that they had no choice but to play along with the $2.1 billion dollar so-called auction if they wanted to keep their deal with state telco TOT for use of its 2.1-GHz spectrum.

In other words, this auction was not the issue. The authorities (NBTC, government, junta) needed to save face and not have the 900-MHz auction end in a total dog’s breakfast and in doing so threw in a new de facto concession as part of the deal. If the second licence went for cheap, TrueMove would want a refund of its $2.1 billion - most of which had already been earmarked for the ICT Ministry to spend. That, and the threat of unleashing article 44 on AIS if they did not cooperate. Article 44 is the absolute power clause in the interim constitution.

The AIS-TOT 2.1-GHz deal is modelled after the CAT-TrueMove 850-MHz deal; the same one that is under investigation by both the auditor-general and the national anti-corruption commission; the same one that was cleared by the NBTC for operating without a license (and subsequently not paying any license fees) as it was an honest mistake and thus they should not be punished; the same one in which CAT forgot to invoice poor TrueMove for $1.2 billion in roaming and revenue share fees.

Thailand is very special. Westerners do not understand Thailand.

CAT (the MNO) hired True to roll out and operate the network, providing only the passive infrastructure (towers and land). CAT then gives True (the MVNO) 80% of capacity for it to run, leaving CAT (and all the other MVNOs) 20% of the capacity to play make-believe telco.

Put another way, it is almost like a concession with 20% fee. Almost.

The AIS-TOT deal would be pretty much the same. Announced as a done deal by ICT Minister Uttama Savanayana back in December and formalised in March, AIS would build 10,000 base stations for TOT and then lease back 80% of the capacity as a TOT MVNO for ten years.

TOT still has a skeletal network despite being first in the country to launch 3G in December 2009.

It has been reported that AIS will pay TOT around $98 million to $109 million (3.5 to 3.9 billion baht) annually for this privilege.

That means a rough ballpark figure of $1 billion for 10 years of most of 15 MHz on 2100. Assuming that TOT provides the metal and land like CAT did for TrueMove, this is a bargain, one that offsets the 900-MHz $2.1 billion auction enough for AIS to go along with it

So it is a win-win situation. AIS gets a bargain 2.1-GHz fudge and facilities thrown in with its overpriced 900-MHz licence in a two for one offer; the junta gets to save face and boast of yet another successful auction; and the practically bankrupt, loss-making state telco that is TOT gets to live on and play make-believe pretend telco on 2.1-GHz for the next ten years by which time everyone who made these decisions would have long retired.

The only ones who lose out are the people of Thailand who have had the deregulation clock turned back 20 years and have to live with this lack of reform in a woefully inefficient industry.

TOT is squatting on 124 MHz of spectrum that is not put to any meaningful use. This deal sets a precedent and shows that the junta is not shy of using the state telco’s resources in bargaining when striking deals with the private sector rather than through fair, transparent, competitive auction.

Next stop is the 2.3-GHz band, of which TOT has 64 MHz. One can only imagine what kind of deals are being discussed behind closed doors now for that prime TDD 4G band.

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