Foreign dominance law may derail Thai 3G bid

02 Jul 2012

Now that the reserve price has been set for Thailand’s long-awaited 3G auction, all eyes are on the issue of foreign dominance, which threatens to derail October's auction.

Under the previous regulator, the National Telecommunications Commission, the foreign dominance notification was devised as a tool that would allow the regulator to penalise and even revoke licences on national security grounds.

The rules went into detail defining foreign dominance as everything from voting rights to the diversity of management, or even if the foreign CEO acted in a dishonourable manner.

Allowing for such subjectivity was never good, but what proved the FDN’s undoing was the stipulation that matters would be forwarded to the national security council for assessment. That a constitutionally-defined independent regulator was required to defer its powers to a politically appointed panel was clearly illegal, and thus a new FDN is in the works, removing the national security clause.

The problem now is that the FDN is like a headless cockroach that can still walk around, and threatens to ruin the party.

Thailand Research and Development Institute vice president Somkiat Tangkitvanich has said that even the revised FDN is irresponsible, and seriously risks violating Thailand’s WTO commitments.

WTO looks at capital, and Thailand’s telecommunications business act allows foreign shareholding to a maximum of 49%. But the FDN goes into much more detail such that the use of shell companies, widely used in Thailand by foreign equity, may push the two largest players over the 49% limit.

AIS is 49% owned by SingTel. DTAC is 49% owned by Telenor. Only TrueMove is comfortably away from being majority foreign owned by that measure.

Dr Somkiat said that those who want a head start will use the FDN to sue the courts to have their rivals disqualified. Those who are at risk of being at the wrong end of the FDN may sue at a national or even WTO level to get the FDN overturned. Either scenario means that it is unlikely that the auction will go ahead with all three current operators participating, and thus the price paid will be the reserve price set at 4.5 billion baht per 5-MHz slot.

The revised FDN has added a clause saying that the law is only applicable where it does not conflict with the country’s foreign treaties and commitments, a cop-out which Somkiat labelled as irresponsible and one that would immediately be challenged in court once the FDN is enacted.

And therein lies the rub. The current draconian FDN is still in effect today. The watered-down version is currently awaiting public hearings before being enacted which the regulator is confident will happen in time for October.

But time is running out. Another delay would push the auction date perilously close to September 2013, when 25-MHz of TrueMove and AIS (DPC) 1800-MHz 2G concession ends, and the status of TrueMove’s current 3G network is still undecided.

And so the country waits with baited breath, waiting to who will bolt first to the courts if the regulator refuses to back down and repeal the FDN entirely.

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