Mobile merger seen as 'perilous'

Mobile merger seen as 'perilous'

True, DTAC deal would hit consumers

Logos of True Corporation and DTAC are seen at a department store in Bangkok on Monday.  (Photo: Reuters)
Logos of True Corporation and DTAC are seen at a department store in Bangkok on Monday.  (Photo: Reuters)

The merger of True Corporation Plc and Total Access Communication Plc (DTAC) will pull down the country's mobile business competition to a "perilous" situation and put consumers in jeopardy, according to the Thailand Development Research Institute (TDRI).

"If the merger takes place, there would be an uptick in market concentration to a dangerous level. This would be a big problem that needs consideration," Somkiat Tangkitvanich, president of the TDRI, said at a virtual news conference on the planned merger.

He based his opinion on the Herfindahl-Hirschman Index (HHI), which gauges market concentration conditions. The highest score of the HHI is 10,000, which shows the maximum market concentration.

According to Mr Somkiat, before the merger, the HHI of the mobile business in Thailand is already high at 3,659 but after the merger the HHI would soar to 5,012.

He compared this with the market concentration of global mobile phone vendors which has a HHI of only 2,210.

The merger would see the new merged entity with a market share of the mobile business at 52%, exceeding Advanced Info Service (AIS), Thailand's largest mobile carrier, which has a market share of 47-48%, Mr Somkiat said.

DUTY OF NBTC

Mr Somkiat said the National Broadcasting and Telecommunications Commission (NBTC) has the direct authority to ensure there will be no action to cause market dominance, based on Section 21 of the Telecommunications Business Act.

"If the merger takes place, there would be an uptick in market concentration to a dangerous level." — Somkiat Tankitvanich, President, Thailand Development Research Institute

He said the NBTC has the power to iron out regulations to ward off market dominance and unfair trade practices in the telecom industry.

The TDRI president said if the NBTC fails to pursue this task, the Trade Competition Commission has the power to deal with the issue.

He said the NBTC has so far signalled that it has no power to block the merger but will regulate the service prices.

"It will be difficult to control the service prices in practice," Mr Somkiat said.

If the two agencies fail to take any action, the government has to come up with some measures for a better situation, such as the liberalisation of foreign investment in the local telecom market.

If the government still fails to act, consumers might have to come out as a political force against the market dominance, he added.

Mr Somkiat said the merger deal would be a boon for shareholders of True, DTAC and AIS as they see an increase in share prices, but will take a toll on a broad range of parties, including consumers, shops, taxpayers, startups and the government.

"With the less market competition, consumers may risk facing an uptick in service charges or be forced to take bundled packages they do not want," he said.

"The deal would leave people with little choice or even no choice to select services in the future." — Saree Ongsomwang, Secretary-general, Thailand Consumer Council

After the merger, which will see only two major operators in the market, the competition in spectrum auctions will not be significant and the revenue from the events would not be as much as in the past.

Taxpayers could also risk facing higher tax collection when the government's revenue diminishes, Mr Somkiat added.

The merger deal is likely to turn the competition in the mobile business back to 15 years ago when there were only AIS and DTAC in the market with users forced to buy mobile handsets from the same operators from which they used SIM cards.

"Personally, I have doubts what the two companies [True and DTAC] said their equal partnership will lead to an intelligent organisation that will help drive the country's competitiveness and innovation to global," he said, asking how many innovations the two have created so far.

"Personally, I don't believe in those tech innovations development after the deal."

CONSUMER PROTECTION

Meanwhile, the Thailand Consumers Council (TCC) has expressed opposition to the planned merger, saying the move would reduce service choices for consumers, lower competition in the segment and foster market dominance.

TCC secretary-general Saree Ongsomwang said business moves that are not properly regulated could risk putting consumers at a disadvantage, especially mobile service which is essential for people's daily life.

"The deal would leave people with little choice or even no choice to select services in the future," said Ms Saree.

"The council has no bias against any specific operators but wants to see related agencies pay attention to consumers' interests." — Boonyuen Siritham, President, TCC

True Corporation holds a 100% stake in its mobile arm True Move H Universal Communication (TUC). DTAC also wholly owns DTAC TriNet, its mobile service operator.

Although the merger only involves the parent firms of TUC and DTAC TriNet, which are telecom licensees subject to NBTC regulation, it is highly likely that TUC and DTAC TriNet would finally merge under the new firm.

"This deal would result in only two major mobile operators in the market and no agencies can guarantee that this new ecosystem would not affect consumer rights in using digital services in the future," said Ms Saree.

State agencies involved should play a role in promoting a competitive ecosystem with an increase in the number of players to boost free and fair competition.

According to her, TCC will submit a petition to the NBTC, the Stock Exchange of Thailand and the Trade Competition Commission, urging them to obstruct the deal process and thrash out a clear resolution to handle possible market dominance and consumer protection.

She said the NBTC in particular is responsible for promoting telecom business and service development as well as ensuring free market competition and consumer protection.

"If the agencies can do nothing to govern the deal or issue a resolution with proper measures, the council will petition the cabinet to intervene in the process," Ms Saree said. Representatives of the three agencies will also be invited for discussion about the issue, she added.

TCC president Boonyuen Siritham said the council has no bias against any specific operators but wants to see related agencies pay attention to consumers' interests.

In the past, the council pressed ahead with legal action against mobile operators for their move to charge mobile calls in seconds to protect consumers.

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