Jasmine International's winning bid for a fourth-generation (4G) spectrum licence raised hopes that Thai telecom consumers would get the most affordable 4G alternative with faster service.
That was the good news.
The bad news is that it has turned out to be a hollow victory for the company, as predicted by industry analysts following record-setting bids for bandwidth prices at the auction in December. Indeed winning the licence has proven to be too costly for JAS Mobile Broadband, the subsidiary of Jasmine International.
BMI Research believes the optimal solution would be to revise the payment structure of its spectrum fee. The Thai government, the global research firm says, relies on spectrum proceeds to fund key infrastructure development projects, and the high starting price proposed for the re-auctioned assets will not attract much interest.
As the March 21 payment deadline draws closer, doubts over new mobile player JAS's launch have surfaced. The Jasmine International subsidiary is reportedly considering forfeiting the 900MHz licence it won in December 2015 (See '4G spectrum results have 3 major implications on market dynamics', Dec 24, 2015), on the basis that it is unable to secure sufficient financing for its first instalment of 8.04 billion baht, along with bank guarantees for the three subsequent ones.
BMI Research believes that the implications of such a scenario will be far-reaching, as the broadband market and Thailand's fiscal budget could also be affected.
In the event that JAS is unable to hold on to its mobile licence, the dynamics of Thailand's fixed line-based broadband market will also be affected, and True Online, the internet arm of True Corporation, could see a boost to its leading subscriber market share.
The National Broadcasting and Telecommunications Commission (NBTC) has threatened to revoke all of Jasmine International's operating licences if the company forfeits on its mobile spectrum payments.
Jasmine derived 91% of its revenue from its core broadband business, which drove 380% year-on-year growth in net profits to 15.71 billion baht in 2015.
True Online will become the only established private player in the fixed broadband segment, and could see its dominance reinforced with the exit of its closest competitor.
In this scenario, it would be likely that other companies, such as AIS and DTAC, would be interested in buying Jasmine's wireline broadband business.
Economic targets linked to spectrum windfall
Although the government will be confiscating JAS's 645 million baht guarantee on the spectrum auction, the NBTC has announced that a possible re-auction of JAS's 10MHz of bandwidth on the 900MHz spectrum will be held by June 2016, with the floor price being set at JAS's winning bid of 75.65 billion baht.
This would ensure that the government's plans for the use of the spectrum monies are not affected. The government had already laid out a series of initiatives, ranging from infrastructure projects to subsidies for farmers, which will be at least partially funded by the 232.72 billion baht windfall from the auctions (see 'Manageable Fiscal Profile Supportive Of Growth', January 13 2016).
The high reserve price will deter interested parties. The success of a replacement auction, however, is doubtful.
Although larger players like Advanced Info Service (AIS) and Total Access Communication (DTAC), which do not have any 900MHz spectrum, will be the most interested in and most efficient in employing Jas's 900MHz frequencies, elevated prices will remain a major deterrent.
AIS had already bid 40.99 billion baht, or 158% above the reserve price, for its 15MHz in the 1800MHz spectrum band in November 2015. The company considered Jas's winning bid at more than 470% above reserve price for the 900MHz spectrum too high to pursue.
DTAC will be the operator most in need of JAS's spectrum considering the risks associated with having its entire 4G network hosted on the 1800MHz band.
First, the operator will have to pay a 30% cut in revenue earned through services on this band to state-owned CAT Telecom.
Second, this revenue-sharing concession will expire in September 2018, after which there is no guarantee that DTAC can continue using this spectrum.
DTAC has said in a statement that the company will be interested in a re-auction of the 900MHz spectrum if the NBTC will set up a re-auction spectrum.
Seeing that 900MHz is the highest valued spectrum and will have the greatest impact on various stakeholders, DTAC has proposed that open and transparent public consultations be held so that the re-auction of the 900MHz spectrum will bring about the most benefits for the industry and consumers.
Moreover, the reserve price of this re-auction should be much lower than the previous winning price, which was artificially driven up, in the event that winner fails to pay for it.
BMI, however, believes that DTAC's access to funds might be limited given that the main reason DTAC was unable to acquire any spectrum in the 4G auctions is because of its parent company Telenor's reluctance to commit too heavily to this volatile market.