A mere two working days have passed since the Thailand’s two 900-MHz auction winners could have paid the first tranche of their licence fees and picked up their licences. Neither new entrant Jasmine nor TrueMove have done so and already the silly season is in full-swing.
National Broadcasting and Telecommunications Commissioner Doctor Pravit Seesathapornwongsa told reporters that if Jasmine failed to pay, the regulator could offer runner-up AIS the licence instead at their last auction bid. Only if AIS said no would there be a need to auction the spectrum again.
Nice to see the regulator having so much confidence in Jasmine.
True for its part was reported to be delaying payment and picking up the licence until an auspicious date as mandated by its shareholders.
One Thai daily, Naewna, quoted an anonymous source within the NBTC saying that the reason True had not paid was because it was still trying to secure a bank guarantee and had pitched the project to several banks now.
On Monday, NBTC Commissioner General Sukit Khamasundara told the Nation that AIS was negotiation with Jasmine for 2G roaming while the Bangkok Post ran a story that CAT would only allow Jas to co-locate on its towers only if CAT can roam into Jas’ new network.
Forgive me for being blunt, but this is insane.
On the AIS offer, the network equipment would have to be turned over to TOT so unless Jas wants to roll out a brand new 2G network for AIS this means that TOT would have to be involved in the deal as well. With only has 10 MHz of spectrum - do the math 5 MHz for LTE plus 5 MHz for 2G makes no sense at all. But perhaps that is the cost of securing TOT cell towers. If so, it is a very, very high cost indeed.
On the CAT deal, remember that CAT sells 80% of its capacity to TrueMove, so why would Jas allow a competitor to roam onto its network? As a newcomer, Jas would need to be gaining customers from the incumbents, not building a network for the incumbents.
CAT and True are both using state domain assets - the cell towers they gained through concessions - to tax a new entrant and prevent competition. Yet, bizarrely, nobody seems to see that as a problem in the land of smiles.
On Doctor Pravit’s point, looking at the numbers, the deposit is just $17.7 million (644 million baht). The first payment is roughly $220 million (8 billion baht), then $110 million (4 billion baht), $110 million and $1.87 billion (68 billion baht) in three years time. The problem however, is not so much the amount of money for the deposit - small change in this industry - but the threat of being blacklisted from any future auction.
If the auction were to be re-run today, the price would be much, much lower. Before the auction, there was no new spectrum on the horizon until Dtac’s concession ended in 2018. MCOT had reneged on its offer to return 2600 and everything else was stuck in limbo (well, stuck with CAT and TOT which is limbo. Or purgatory. Or Inferno, come to think). The price was high because it was do-or-die time.
But after the auction was finished, The ICT Minister suddenly decided to play Santa, giving CAT permission to roll out 4G on the 1800 that was expiring in 2018 as well as upgrading its 850 network to 4G (to give to True) while also confirming that TOT would upgrade its 2100 network to bequeath to AIS.
The real kicker was TOT’s announcement that it would be investing 20 billion Baht of USO money for a network for the poor and low-ranked.
In other words putting one and one together, we get a scenario where tax money (USO funds) will be used to upgrade TOT’s network and and it will resell 80% of it to AIS under a wholesale MVNO agreement.
Essentially it’s a mirror image deal of CAT-True’s 850 network where taxpayer money was used to accidentally build out a nationwide 3G network for True without any licence or cabinet approval.
Higher up, MCOT changed its mind again and now we have a 2600 auction pencilled in for 2017 all of a sudden.
Suddenly 75 billion baht - about the same amount as Dtac’s entire market cap it must be noted - for 10 MHz of 900 does not seem like such a good deal.
So what is going to happen?
A lot of it boils down to game theory. True has way more to lose than Jas, and that means that True cannot pay first lest Jas defaults and leaves True stuck with a very, very expensive licence when the re-auction goes for half the price. If Jas defaults, can True wriggle out of it and have the entire auction re-run and blame everything on Jas? I would guess so.
Ultimately it might not depend so much on Pete but on his bank and partners. Can Jas get its finances in order given how much more competition as suddenly appeared after the auction closed? Banks need to do due diligence (or what passes as due diligence in Thailand, which is a pretty mild form of it). There are rumours that Jas strategic partner is having second thoughts because of the high price paid. Creating a new company, Jas Mobile and putting it through an IPO to raise funds as CEO Pete said he would do to finance the network, would take time and the clock is ticking. The first payment and the bank guarantee for the rest must be paid within 90 days of the auction or on 30 March.
I think Pete will pay, but late. He has time and first he has to find out where he can stick the equipment. Jas does not need a licence to import equipment as the vendors are free to import stock these days. The real question is what will happen come December 2018 when 68 billion baht is due.
Like I said, the 900-MHz auction after-party is just getting started.