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There was no enthusiasm from politicians or telecom companies to break their present cosy arrangements and proceed with the deregulation of the telecommunications industry, with negotiations stalled on how lucrative concessions should be converted

 

TELECOMS

Nothing ever quite rings true

VIVAT PRATEEPCHAIKUL

Conversion of telecom concessions to ensure fair competition before market deregulation made slight progress during the second half of 2000.

Altogether 36 concessions have been granted since 1989 by two state enterprises - the Telephone Organisation of Thailand and the Communications Authority of Thailand - and one government agency: the Post and Telegraph Department.

The 26 concessions the TOT and the CAT granted were for joint ventures. Five have already been scrapped or converted. Converted are Shinawatra Directories and Shinawatra Datacom, while the three scrapped are Radio Phone, Fonepoint and Lines Technology.

Fewer than 20 concessions are on the list for conversion talks under a framework drawn up by the Thailand Development and Research Institute, but only five, which are very complicated, are now considered priorities.

They are the concession for TT&T, a provincial fixed-line carrier; and five major players: TelecomAsia Corp, a metropolitan fixed-line carrier; Advanced Info Service and Digital Phone Company, both subsidiaries of Shin Corps; and Total Access Communication and Wireless Communication Service.

During the second half of 2000, an 11-member concession conversion committee could barely achieve even one conversion though it was given an extended six-month period from June.

The committee's term expires at the end of December, which means that a new conversion committee might be set up to take over when the new government is formed. This might raise the possibility of starting from square one again if the conversion policy is to be changed as the result of a government change.

The committee chaired by Aran Thammano said the most difficult part of the conversion process was the compensation which each private operator needed to pay to its respective concessioner if their revenue-sharing concessions were to revert to licences.

Compensation varied with the number of years left in the concession, reductions in revenue-sharing, valuation of assets, and the financial position of each concession-holder, among other issues.

Based on the TDRI's conversion framework, compensation to be paid to the state by private companies must be in a lump sum calculated from the date of the conversion until the end of the concession.

This guideline was totally rejected by private operators who argued they were willing to pay compensation until 2006, the year when the market is to be fully deregulated for all players, local and foreign.

The first conversion the committee expected to complete was for the provincial fixed-line operator, Thai Telephone and Telecommunication, but the compensation issue remains unresolved.

TT&T proposed to pay nine billion baht compensation to convert its 30-year concession, while TelecomAsia was reluctant to pay compensation. Instead it asked for compensation from the TOT and proposed to buy back its business for only 14 billion baht.

Acumen, a Vsat (very small aperture satellite) operator, also proposed 100 million baht in compensation to the TOT. Talks are still on and there is no imminent settlement.

Although no conversion has been settled yet, there were positive signs of compromise when some agreements were reached in principle. The committee and the concession-holders agreed in principle that the conversion was a means not of terminating the contracts but of improving them before market liberalisation.

Regarding compensation payments after the concessions are converted into licences, they agreed that calculations should be based on current service operations.

Compensation calculations became a major sticking point when the TDRI recommended the inclusion of any value-added services created in the future.

Fixed-line and cellular operators have introduced several value-added services that could be expected to generate steady revenue streams in the future, and there is a sense in government circles that the state should be entitled to its share of these new revenues as well.

TA, for example, added the low-cost long-distance phone service called Y-Tel 1234. The TOT has said, however, that Y-Tel is a new service - and thus prohibited under the concession - and not value-added as TA claims.

Asset ownership transfers are another crucial issue for the telecom companies. All have agreed that the net present value will be calculated as of the time the government liberalises the telecommunications market. Thus a specific date must be set.

Fixed-line and cellular-phone operators have invested between 40 billion and 60 billion baht each to build their networks. They also plan huge investments for further expansion next year.

Now with the expiry of the committeeûs term, questions have emerged about whether the new government would allow it to continue or refer the deliberations to the seven-member National Telecommunications Commission (NTC) which has not yet been established.

From experience, whenever a new government takes over, policy will always change. In telecommunications policy, particularly concession conversion, many questions remain. Meanwhile, there were also fears that politics might again influence the appointment of the NTC.

The selection process to choose the 14 nominees was marred by several interest groups seeking to have their people sit on the NTC - proof of lingering power struggles. According to the country's Telecom Master Plan, the NTC must be an independent body tasked to ensure free and fair competition between existing operators and new players.

The Senate will select seven people from the list of 14 nominees and appoint them to the NTC, but this is not expected to be done at least until a new Parliament convenes some time in February.

Foreign telecom companies are waiting for the establishment of the NTC before they will move in. They are not concerned about whether the state enterprises have or have not been privatised, but they are concerned about whether the independent body can handle the complexity of the telecommunications business.

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