Thailand's unresolved satellite mess

27 Jun 2011

In the same week that Thailand’s communications ministry gave the go-head to prosecute those involved with authorising the Shin Satellite concession amendments, it cleared the same company to send up a new satellite, Thaicom 6.

Duplicity? Duality? Hardly. It’s bureaucracy at work. One thread is still hammering away at the repercussions of judgement day (the supreme court ruling on former Prime Minister Thaksin Shinawatra’s conflict of interest and asset seizure case), slowly working backwards from the guilty judgement and expanding the verdict to everyone involved in the case. The other case is business as usual, so as long as the fallout has not reached Shinsat and its concession holder, CAT Telecom, just yet, new satellites can still be approved.

To understand the satellite saga, one must go back to the coup. No, not the 2006 coup, but the 1992 coup (Thailand has had a lot of coups).

It was during this period that a certain ex-IBM computer salesman wrangled a satellite concession out of the military junta in its dying days.

Indeed, it was the Shin Satellite concession that gave rise to the 1992 Joint Public Private Investment Act that is very much in the headlines today - with history repeating itself yet with the concession holder simply ignoring the law, much to the protest of many in society.

The royally appointed Anand Panyarachun government saw a history of state enterprises inking deals, such as the Shin Satellite deal, without proper consideration as to the costs and benefits and the PPP law was introduced as a safeguard.

In a nutshell, any project that is worth over one billion baht and/or uses public resources must go through a process of assessment that involves studies by the National Social and Economic Development Board, the Ministry of Finance and ultimately the Cabinet of Ministers. This way they can all be held responsible when a deal goes sour, rather than some long, forgotten governor of a state enterprise or deposed former junta leader.

The satellite concession was, reasonably enough, designed in a pay-as-you-go fashion. After sending up the satellite, Shin Satellite would only have to pay concession fees at a later date as each transponder was turned on.

Thaicom 1’s capacity was filled, and later so was its backup Thaicom 2. So what does a satellite company do?

In a normal, rational land, the concession holder would put out a bid for another satellite and have an open bid on it. In Thailand, what happened was that Thaicom 3 was “sent up” piecemeal, one transponder at a time.

Each transponder was approved individually so that the value of each approval was under the one billion baht threshold and thus would not have to go to Cabinet. On paper, it seemed to make sense, after all, each of the transponders on Thaicom 1 and 2 were paid for individually, so sending up another transponder seemed reasonable enough to the bureaucrats at the Ministry of Transport and Communications (precursor to MICT), never mind the very minor detail that it involved a new satellite and a new launch.

After that lapse in the laws of sanity, Thaicom 4 was easy. It should have been a copy of Thaicom 3 but instead it was amended into a broadband spot beam satellite, breaking the contract further.

As fate would have it, Thaicom 3, which now lacked a backup, did suffer a short circuit in its solar array. Thaicom 5 was approved to replace the stricken 3 and more recently - as Thaicom 1 and 2 reached the end of their operational life - Thaicom 6 was approved.

By now everyone had stopped calling for new bids to be held and had given up.

The MICT committee calling for the prosecution of CAT and Shinsat executives focuses on these points and the amendments to the concessions. Thaicom was a project designed for domestic communications and the price of the (cheap, junta approved) concession was priced with that in mind. By amending the concession so that, in the extreme case of Thaicom 4 / IP Star, 94% of capacity was aimed at an international market, this cost the state a lot in lost revenue.

A precedent is in the now defunct ITV TV Station. The price bid for the concession for ITV was very low as it was for a news channel with no advertising allowed. Then, under a certain government whose family just happened to own the station, it was changed to allow advertising and the news ratio was lowered, increasing the value immensely.

After the coup (the 2006 one this time), the (existing, untouched) courts agreed with the (junta-appointed) prosecuting committee that this ITV had broken the law and the station’s concession was revoked.

Many satellite industry people seem to be perplexed at how Thaicom is forced to operate under archaic restrictions in a highly competitive, international industry. But the restrictions are of their own making; by morphing a cheap domestic satellite concession for two satellites into a much more valuable international one with a fleet of six, such complications can only be expected.

Other issues include the use of state subsidies for a Thaicom deal with Myanmar. Then there are a few red herrings such as the insurance payout money for Thaicom 3 that was sent directly to Shin Satellite rather than to the Ministry of Finance as per the contract. The money would probably have to go to Shin Satellite anyway eventually. Then there is the part where Shincorp’s shareholding was lowered below a stipulated threshold.

The motto of the story here is that the PPP law was designed to prevent such back-room deals from happening again and transparency would be good for all. It would hold politicians and their appointees in state enterprises accountable.

If the act can be circumvented and if the bureaucrats decide to look the other way and focus on the minutiae, what is there to stop entire 3G networks being rolled out in finely chopped but coordinated contracts, each under the one billion baht threshold, held together by an elaborate network of backroom deals, kickbacks and political influence? Each individual component might seem innocent in isolation, but bring them together and it is a de-facto concession through the back door.

So, while the mess that is Thaicom continues, the True nightmare is only beginning.

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