National Telecom (NT), the state-owned telecom enterprise, is weighing options on how to handle its loss-making fixed broadband business, including the prospect of renting the infrastructure to other players to operate.
NT said the losses stem from fierce market competition and a push for the network system transition from copper wires to fibre optics across the country.
The prospect of the acquisition of fixed broadband provider Triple T Broadband (TTTBB) by Advanced Info Service (AIS), the country's largest mobile operator, is also expected to affect the competition landscape, NT said.
Col Sanphachai Huvanandana, newly-appointed president of NT, said its fixed broadband business has been hit by losses due to intense competition while customers tend to switch to operators that offer more attractive promotional packages.
NT is also investing in the installation of a fibre network nationwide to replace its old network of copper wires, he said.
"We have to review our broadband business plan to find the most suitable way to deal with it," said Col Sanphachai, who took up the position last month.
He told the Bangkok Post that NT expects to reach a resolution on the issue by the middle of next year.
"We have to monitor the planned acquisition of TTTBB by AIS closely as the deal will have an impact on NT's business in the long run," he said.
Various options are on the table, including pursuing a new strategy, seeking partnerships as well as ending the retail business and renting the network infrastructure to other players to operate.
He agreed that renting the infrastructure to others is one of the interesting approaches.
The fixed broadband service is the core revenue for NT, which has a 20% market share, and NT holds out hope that the business could help sustain its revenue stream once its partnership agreements with mobile operators on the usage of its cellular frequencies expire in 2025.
The frequency usage agreements generate 50 billion baht for NT per year.
After 2025, NT will still have key assets, including 700-megahertz and 26-gigahertz frequencies.
According to Col Sanphachai, NT is transforming itself into a neutral operator through its existing infrastructure, such as cellular towers, microcell sites, conduits and submarine cables, which can be offered for usage by other players.
"NT holds various kinds of assets worth 216 billion baht in total but the return of the investment is still very low at 1%," he said.
NT may need to seek partners to boost return on asset (ROA), he said, adding the company has a plan to develop a profitable business, which can be spun off from NT in the future.
In the first half of this year, NT posted 1.6 billion baht in net profit.
INFRA-SHARING MODEL
Pisut Ngamvijitvong, senior equity research analyst at Kasikorn Securities (KS), said NT should have a clear strategy for its fixed broadband business in the long term.
NT should seek partnerships to help drive the business or transform itself from a retail operator to a wholesale service provider with an infrastructure sharing approach, he said.
"Infra-sharing model should be a core business for the company in the long term," Mr Pisut said. "Businesses with good ROA can also be spun off from NT."
Once AIS succeeds in acquiring TTTBB, AIS will become the second biggest player in fixed broadband service with a 34% market share, behind TrueOnline with a 39% market share, Mr Pisut said.
NT and other provincial operators have a combined 27% market share.
The fixed broadband market landscape could turn into duopoly after AIS succeeds in acquiring TTTBB, similar to other business sectors, such as department stores, hypermarkets, convenience stores and high-speed train operations, he said.
AIS expects the acquisition deal will be completed in the first quarter of next year.
AIS also has its own fixed broadband business under AIS Fibre brand, which was launched in 2015.
According to Mr Pisut, the emergence of AIS Fibre has shaken the fixed broadband market, which now has average revenue per user (ARPU) of 450 baht per month, sharply declining from the level seen a few years ago.
With more competition, NT was forced to roll out price-cutting promotional campaigns, incurring losses.
However, fixed broadband service contributes only 7% of AIS's total revenue, compared with 30% of True Corporation and 90% of Jasmine International Plc, the parent of TTTBB.
Mr Pisut said a decline in the fixed broadband market's ARPU allowed AIS to purchase TTTBB at the lower price while AIS's profits still crucially come from its mobile business.