NEW DELHI, India-The Thai cellular market witnessed rapid growth and intense competition during 2001. Subscriber numbers reached a landmark, crossing fixed-line subscriber numbers much earlier than expected. Tariffs are decreasing, and value-added services are generating huge revenues for operators. Next-generation services like General Packet Radio Service (GPRS) are not far away, but the lack of a clear roadmap to telecom reforms could hamper fresh investments in the near future.
AIS and DTAC, the country’s two largest mobile operators, added record numbers, taking the total to more than 6 million at the beginning of October compared with about 5.6 million fixed-line subscribers. Securities firm JP Morgan had predicted the number would reach 7.1 million by the end of 2001 and 11.1 million next year. But the government-controlled Telephone Organization of Thailand (ToT) had forecast that mobile phones would not overtake fixed-line phones until 2004.
The rapid increase in subscribers is being attributed to the sharp decline in the prices of handsets and service charges. The minimum handset price is now 3,900 baht (US$87). At the beginning of 2001, both TAC and AIS launched promotions that substantially reduced tariffs.
The standard monthly tariff for a heavy cellular user of 600 minutes per month, including 150 minutes for domestic long-distance, is about 3,350 baht (US$75). A subscriber for this level of service currently pays 1,200 baht (US$27) a month on DTAC’s network and 1,250 baht (US$28) for AIS with the promotions.
“Both are exceptionally good offers and demonstrate the benefits to the public that competition can bring,” observed Richard Moe, director and regional telecom analyst for Thailand, Indonesia and the Philippines for SG Securities Asia based in Bangkok, Thailand.
Some analysts believe prepaid pricing has allowed operators to tap into a new market, resulting in dramatic growth. “Clearly, Thailand is the market to watch over the next few years,” said John Barrett, analyst for the Asia-Pacific region at U.S.-based Pyramid Research. “There’s going to be 10 million new prepaid subscribers up for grabs, and the smaller operators like CP Orange and Tawan Mobile have an opportunity to capture a substantial number of these.”
The market is all set to witness more fireworks. CP Orange, a joint venture of the Franco-British firm Orange with a 49-percent stake, TelecomAsia with 41 percent and CP Group with 10 percent, is planning an aggressive launch by the beginning of 2002. With a capacity of 1.1 million subscribers and a US$600 million investment, the new entrant hopes to break into the market share of AIS, which controls a formidable 58 percent, and DTAC. Clearly, the big boys are not taking Orange lightly-AIS has tied up with SingTel, and DTAC partnered with Norway’s Telenor.
Regulatory hurdles
But future growth depends on the resolution of key issues relating to revenue sharing and a regulatory body. The parliament in October passed the controversial Telecommunications Services Act, under which the regulatory body called National Telecommunications Commission (NTC) will be established. The new law also seeks to limit foreign equity in telecom ventures to 25 percent.
Communications Minister Wan Muhamad Nor Matha has clarified that the new law will not affect existing players because it will not be applied with retrospective effect. He also said the government would amend the clause relating to foreign equity, because “our policy is to persuade more foreign investors to co-invest with Thai investors. Right now, almost all telecom firms have foreign holdings of more than 25 percent.”
The government plans to privatize both ToT and CAT, reducing their roles to mere service providers with their regulatory powers transferred to NTC. All existing players will also be required to convert their current concessions with ToT and CAT and apply for fresh licenses from NTC. Concessionaires will have to pay a lump sum amount to the two agencies for the rest of the period of their concessions. No contracts have been converted so far due to disagreements on the value of existing concessions.
“The best path forward would be the elimination of the revenue-sharing system and its replacement by competitive markets. As we have seen this year with the cellular market, competition will reduce prices and increase the supply of telecom services,” said SG Securities Asia’s Moe.
