On 3 December 2009, Thailand’s state owned Telco TOT launched a skeletal 3G network on its 15 MHz swathe of paired 2100 spectrum with 548 base stations scattered across central Bangkok. One and a half years later, things are only starting to stutter forward.
The main stumbling block was funding and public sector debt. TOT wanted around 17 billion baht ($557 million) to roll out its 3G network, and as a corporatised former state enterprise, that debt would still have to count as public debt. It took years for the Ministry of Finance to agree to authorise the loan.
Some argue that TOT is now a company subject to usual business laws. Others argue that as a company wholly owned by the Ministry of Finance, it is still a state enterprise. TOT’s merry-go-round of chief executives has not helped.
Then came the controversial bid that saw ZTE kicked out for unrealistic financial projections (offering too much capacity) and Ericsson for missing a brochure of an antenna.
TOT recently summoned 21 existing and potential MVNOs to a meeting to determine selection its partners. TOT plans to have one main partner using 40% of network capacity, two more at 20% each, 10 % for itself and 10% of capacity for any other number of partners.
However, the idea was for a reverse auction - for partners to tell TOT how much they would offer the network operator. In other words, how much they were willing to subsidise early roll out and how deep their pockets were.
One of the smaller incumbents complained that the deal was unfair as while larger partners (namely MVNOs Samart and Loxley, the initials in the SL consortium that won the 17 billion baht bid to build the network for TOT) were allowed to issue letters guaranteeing their commitment, smaller MVNOs would be forced to pay up six years’ fees upfront.
The question nobody is asking is that if Samart and Loxley build the network on one side and then take 60% of capacity on the other side, what is TOT doing? Is it still a telco? Or just a gate-keeper, a tax-collector?
Put another way, how would it be different from the 80% capacity CAT-True deal that is attracting so much attention?
Well, it might turn out very different. While the S and L in SL Consortium though they would have it to themselves, along comes a joker to the table.
Singaporean owned AIS now wants to be able to “roam” to the TOT network in addition to its 900 MHz 3G. Indeed, buried deep within the heavily amended contracts AIS has with TOT includes a clause that gives them that right should the concession holder (TOT) go 3G.
Previously AIS did not really push this idea much, as the aborted September 2010 bid documents said that anyone with existing IMT 2000 spectrum (2100 MHz) would be excluded from bidding for more 3G spectrum.
But fast forward to today and the idea of invoking that clause suddenly makes more sense. Why bother spending billions of your own money on a licence and network if you can get the government to invest in one for you? After all, if True can do so with CAT, why not just follow suit?
But AIS has 31.2 million subscribers, just under half the Thai population. It would be impossible to allow all users to roam to TOT’s 3G network overnight purely on capacity grounds. Allowing users to manually select the network would be cumbersome and only suited to the most hardcore of technophiles.
A potential answer being mooted by the two would be to allow AIS to install a secondary HLR (Home Location Register) server on TOT’s 3G network so it could manage and allow its users seamless access to the network. But this raises many more questions and goes far beyond a normal MVNO arrangement. What would the effects of having a behemoth with 30 million users and control and insight into network operations be on competition and on operations?
Mainstream media, however, have quickly latched onto the question of revenue share. In the final five years of its concession, AIS has to pay 30% of revenue to TOT for its 2G network. What would happen when an existing 2G customer roams to AIS 3G?
If they do not have to pay 30%, would that be legal or fair? If they have to pay 30%, how could they compete with the other MVNOs? And what about incoming calls and interconnection fees? Would AIS 2G calls to AIS 3G calls involve cross network payment? Not to mention how pre-paid wallets would have to be managed.
Concession conversion should have happened so that everyone could move forward with a fair and level playing field, but it did not and this mess is just one example of the price that the industry is paying for inaction.
The other snippet of information gleamed is more worrying. Free trade obligations to the WTO clearly state that Thailand’s state enterprises cannot compete with the private sector or engage in cross subsidisation. CAT taking revenue share from DTAC and subsidising a network for True is a clear violation that many have highlighted. But while less blatant, is TOT that different?
TOT’s answer apparently is to distance itself from SL on paper. TOT intends to use its Thai Mobile subsidiary that used to run a GSM 1900 network as an intermediary. TOT would sub-contract the 3G network to Thai Mobile, and for Thai Mobile to hire SL Consortium. After all, it worked for Thailand’s squeaky clean-image state oil company, PTT and its subsidiary PTT Exploration and Production which does shady deals in many countries that are under EU and US embargo.
Meanwhile, the existing MVNOs are left in legal limbo. Their contracts expired last December and have yet to be renewed. One MVNO said he is operating only on the basis that he asked TOT for an extension but since no reply was received in 45 days, Thai law allows him to presume to have an extension of the current contract. However, while the five MVNOs can continue their half-life of operations under such a regime, it makes investment, brand building or finding a partner impossible.
Que Sera Sera.