Critics slam aid for big three

Critics slam aid for big three

A panel of academics and consumer advocates criticised Section 44 aid for the three major telecom operators, saying the move would cost the state B19.7bn.
A panel of academics and consumer advocates criticised Section 44 aid for the three major telecom operators, saying the move would cost the state B19.7bn.

Academics and consumer groups voiced strong opposition on Friday to Section 44 assistance for the three major telecom operators, saying the move would cost the state 19.7 billion baht and enrich the three firms through reduced financial costs stemming from an extension of their last 900-megahertz licence payment.

Meanwhile, the state would face benefit losses and opportunity costs, the campaigners said.

The reduction to cost of capital for the 900MHz payment comes at no interest to the three operators throughout the new payment term. The companies also benefit from having no costs from equity financing, as the operators would not need to raise capital through the sale of shares for the original payment term.

Somkiat Tangkitvanich, president of the Thailand Development and Research Institute, said Advanced Info Service (AIS) would benefit to the tune of 8.3 billion baht under the new payment terms, while True Move H Universal Communication (TUC) would gain 8.7 billion baht and Total Access Communication (DTAC) would reap 2.5 billion baht.

"The interest cost and cost of equity financing could be called the weighted average cost of capital (WACC) based on present value year-on-year," Mr Somkiat said.

He said AIS's WACC is roughly 9.2%, TUC's 9.7% and DTAC's 9.5%, according to telecom sector analysts.

The government invoked Section 44 powers on April 10, allowing the big three telecom operators to extend their 900MHz licence payment terms for another five years, provided that they agree to buy 700MHz licences for 5G development.

Additionally, Section 44 will waive the remaining two terms of all digital TV operators' licence payments at a combined 13.6 billion baht, as well as subsidise their rental fees for broadcasting networks (MUX) worth 18.7 billion baht for the remaining nine years of the digital TV licences.

The National Broadcasting and Telecommunications Commission (NBTC) plans to sell off 45MHz of bandwidth on the 700MHz range to the three mobile operators, divided into three licences containing 15MHz of bandwidth at 25 billion baht each.

Money from the sale will be used in part to assist digital TV operators.

Mr Somkiat said there are seven issues regarding the state and public benefits from Section 44.

First, the three mobile operators would benefit at a combined 19.7 billion baht in saved costs, while not being charged interest on future instalment payments.

Second, the allocation of 700MHz for sale to the three operators is seen as a privilege rather than an obligation for the operators. This would indirectly create an oligopoly system for the big three in the 5G era.

Third, big tycoons or owners and foreign investors of the mobile operators are the group gaining the most from Section 44.

Mr Somkiat said AIS reported a net profit of 29.6 billion baht for 2018, True Corporation reported 7 billion baht and DTAC reported a net loss of 4.3 billion baht.

But DTAC's loss last year was due to its expenditure on a settlement with CAT Telecom worth 9.5 billion baht.

Fourth, the 5G spectrum auction or sale is not an urgent issue for the country, as 5G technology is still in the early stage and remains immature.

Fifth, invoking Section 44 is seen as an irresponsible use of power by the government.

The government invoked Section 44 one day ahead of the Songkran festival, thus avoiding serious public criticism. The invocation happened after the general election, with the government trying to avoid criticism over abuse of power for political gain.

Sixth, Section 44 gives too much authority to the NBTC secretary-general to use his own discretion. It rules that the secretary-general can analyse and decide if the related parties found any problem with the implementation of Section 44, and the decision of the secretary-general is final.

Seventh, the country and people are the losers in the deal because the three operators benefit at the state's expense.

Additionally, Section 44 is turning the telecom sector back into the old concession regime despite being now under a licensing regime.

The concession regime always encouraged lobbying and government manipulation by the telecom sector.

Saree Ong-somwang, secretary-generalof the Foundation for Consumers, said Section 44 will discourage newcomers to the telecom business, hurting competition.

Moreover, the mobile operators may push their future operating costs onto consumers.

More importantly, allocating the 700MHz spectrum for sale to the three operators may create losses for the country's benefits and opportunities, Mrs Saree said, because it would not be done through an auction process and the three operators benefit from the reduced cost of capital for their 900MHz payment extension.

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