The case against the 69 billion baht of assets seized from Thaksin and his family in regarding to what Thaksin did to benefit Shin Corp is coming to a conclusion with the verdict due at the end of February. By all accounts, all the money will be seize. The claims against Thaksin are outlined from this The Nation article below:

Prosecutors claim:

1. Telecom concession fees were converted into an excise tax to benefit their massive AIS shareholdings.

2  AIS’s concession fee was reduced from 25-30 per cent |to 20 per cent.

3  AIS’s roaming charges were waived, resulting in Bt18.9 billion in losses for state-owned TOT, CAT.

4  The state concession was amended to benefit family-owned ShinSat.

5 Exim Bank’s loan of Bt4 billion was approved for Burma to buy ShinSat’s services.

BP: Below is an excerpt from a 2007 post looking at these issues. The annoying thing about all of this is that Thaksin had done nothing, AIS would have a much larger market share as the changes his government made to the DTAC concession at the same time, his main competitor, meant they were able to compete with AIS in the pre-paid market. If these changes had not been made, the Thaksin family holdings would have been worth a lot more. This is what BP can never understand why this is not mentioned.

Will repeat the main point, DTAC’s concession was changed so instead of paying 200 baht a month, they only paid 18% whereas AIS moved from 25% to 20%. It bares pointing out that Average Revenue Per User (ARPU) in mid 2005 was 314 Baht. Now, if the concession had not changed, DTAC would have to pay 200 Baht whereas after the change in concession they only had to pay 56.52 Baht (ie 18%). It does’t take a genuis to work out if AIS only had to pay 25% and DTAC 200 Baht then DTAC would not have been able to compete with AIS yet because the Thaksin government reduced both concessions, this is one of the stated reasons, why the government will seize the entire 76 billion baht. Explain the logic of that.

Below is the 2007 post:

Asia Sentinel have an interesting article which looks at policy corruption and the freezing of Thaksin’s assets:

It has proven difficult to nail Thaksin for anything directly illegal, perhaps because he carefully lawyered his moves before making them. But the real problem, from the junta’s point of view, is that Thaksin should have never been allowed to enter politics in the first place. As one of Thailand’s wealthiest businessmen before he became prime minister, Thaksin was bound to trip over his telecom holdings. As Thailand’s first tycoon-leader, he broke a political mold and raised enormous concerns with reformers and traditionalists alike that his wealth and swagger would do irreparable harm to the state.
…
Nonetheless, the AEC’s moves ensure that the focus over the next few months will turn back to the Shin sale, which initially sparked the anti-Thaksin protests and provided much of the junta’s justifications for the coup. This could deflect questions about the military government’s own missteps by shining the spotlight on a deal that a great many people, including Bangkok’s middle class, found to be immoral.

The case, to be tried in Criminal Court assuming Thai prosecutors move forward with the charges, features nothing overtly illegal. Indeed, prior to the coup Thaksin’s opponents combed through the Shin deal’s fine print in a bid to pin him down.

But the deal was conducted transparently through the Thai stock exchange, which allows tax-free transactions. Thailand’s Securities and Exchange Commission investigated the transaction, but only found some disclosure violations from Thaksin’s son, who had a large stake in the deal, and fined him a mere six million baht.

Since the coup, government authorities have attempted to force Thaksin’s children to pay about six billion baht in taxes for share transfers connected to the deal. But the children have a statement in writing from the Revenue Department – from the time when dad was still powerful ‑ saying they didn’t need to pay the tax. Unsurprisingly, the junta sacked the former Revenue Department chief and filed malfeasance charges against him.

So with the technical bases covered, the junta had to become more creative in its bid to take Thaksin’s cash. The prosecution has broadened its scope to argue that Thaksin was secretly holding Shin stock through nominees and making policies while in office with the specific intent of boosting the value of Shin Corp, which has interests in telecommunications, satellite services, media and real estate. Kaewsan and some other former senators tried to bring a similar case to the Constitutional Court a month after the Shin sale, while Thaksin was still on the scene, but it was tossed out.

“We are just concerned about the Shin case in regard to freezing the money, because with the other cases we are investigating we don’t have grounds to freeze the money,” Kaewsan said. “We can show in court that the money that came from that transaction is illegally held through a nominee and Thaksin’s abuse of power added value to Shin Corp.”

For all the AEC’s digging the past eight months, they ended up with a case built on arguments that have been debated in public for the past five years. It all started as far back as 2002, when the phrase “policy corruption” was first used concerning the planned liberalization of the telecommunications industry.

Anti-privatization activists said the move would lower concession payments to the government. They failed to mention, of course, that Thailand was required to end the state-run telecom monopolies and fully liberalize its telecommunications industry by 2006 to meet World Trade Organization commitments.

That step-by-step liberalization process led to a problem of sorts for Thaksin, whose family-owned Advanced Info Service (AIS) was Thailand’s market leading telecommunications firm. Telecom liberalization would lead to more money for private companies, and his company was well positioned to profit.

A BusinessWeek story in 2002 noted the dilemma: “The Prime Minister says he is all for liberalizing Thailand’s overregulated telecommunications industry. But he is holding back, say analysts, since going ahead would open him to allegations that the real purpose of the reforms is to help the Shin group.”

As it happens, charges of collusion came fast and furious once Thaksin started liberalizing the industry. Shin reaped tremendous profits, and Thaksin’s critics accused him of tweaking policies to benefit his company. In 2003, AIS saw profits rise 62% to 18.5 billion baht. The next year, AIS’s net profit grew another 9% to 20.3 billion.

But that’s where the gravy train came to a halt. In 2005, a fierce price war prompted AIS’s revenue to drop 4% to 92.5 billion baht, and net profits fell 8% to 18.7 billion baht. Last year, earnings fell another 13% to 16.2 billion baht.

So how have AIS’s rivals fared? The two other major mobile phone operators, third-ranked True Move and second-ranked DTAC, have both seen steady growth and chipped away at AIS’s market share in the past few years. Although DTAC still lags behind AIS, its net profit has grown for four straight years. Net profit rose 24% in 2003 and 73.3% in 2004 to 4.5 billion baht. And although AIS’s net profit fell the past two years, DTAC’s rose 3% in 2005 and another 7% last year. Analysts expect its net profit to see double-digit growth over the next two years to more than nine billion baht if the sector is liberalized further.

Moreover, AIS’s share of service revenue during the last five years of Thaksin’s rule actually fell to 53% in 2006 from 68% in 2002. In that time period, DTAC’s share of service revenue jumped to 32% from 28% and True Move’s rose to 15% from only 4%. AIS peaked in 2004 and has fallen since as its rivals have slashed prices.

Allegations pose large questions

The point of this is that it may prove tricky to prove “policy corruption.” The playing field was certainly tilted in favor of AIS, but it’s tough to pin that solely on Thaksin. Back in 1990, when the concession was first granted and Thaksin was still an executive, TOT exempted AIS from charges to access its fixed-line networks in an effort to give it a market advantage over concessionaires of CAT, its fierce rival. In the early 1990s, AIS used this advantage to reap billions, although its rival DTAC also took in stellar profits. This led to calls for market liberalization.

The financial crisis ended talk of reforms and helped deter new players. By the time the economy recovered a few years later, Thaksin was premier.

The AEC says the evidence of abuse of power lies in seven suspicious decisions from Thaksin that led to accusations of unusual wealth: four concerning AIS and three involving Shin Satellite. The accusations involving AIS involve about 100 billion baht in “lost” revenue compared to just a few billion from Shin Satellite. Even so, if the allegations against Thaksin stick, then many new cans of worms may be opened.

Thaksin’s critics accused him of conflict of interest when he blasted AIS’s rivals in 2002 for refusing to pay the discriminatory access charges to TOT. The state enterprise backed Thaksin and threatened to cut off DTAC and the forerunner to True Move. Many saw this as TOT manipulating the playing field for Thaksin’s personal gain, even though the Administrative Court ‑ which displayed a flare for independence in blocking the initial public offering of the state-run electricity monopoly in 2005 ‑ also ruled in favor of TOT.

While Thaksin did indeed benefit, it’s also clear that TOT was also looking out for its own interests. Even after the military ousted Thaksin, TOT threatened to cut off DTAC and True Move for refusing to pay access charges, and the government is now doing all it can to resist efforts to switch to interconnection charges, which would truly help level the playing field.

If Thaksin is found guilty of policy corruption for telling CAT concessionaires to pay access charges, then would prosecutors go after the current government for saying the same thing?

The AEC also fingered Thaksin for TOT’s decision to reduce AIS’s revenue-sharing payments on pre-paid calls to 20% from 25%, which investigators say cost the state 71.7 billion baht. The military-appointed government is now hoping to boost those payments to 30%.

But that decision came about because TOT agreed at the same time to a DTAC request to amend access charge payments from 200 baht per user per month to 18% of pre-paid revenue. If the court rules that decision is deemed policy corruption, does that mean Thaksin will also be charged for the money DTAC saved by reformulating the access charge agreement?

COMMENT: If DTAC still had to pay 200 baht per user per month on pre-paid revenue and AIS 25% would DTAC be able to compete?

According to a DTAC report from August 2005 “Prepaid average revenue per user (“ARPU”) in Q205 was THB 314″. They would not be able to sustain such low prices with ARPU being only 314 baht and having to pay 200 baht per month as part of their concession.

NOTE: Edited this post to reflect it was 69 billion baht and not 76 billion baht that was frozen.

I actually do wonder exactly how much extra money the government received from the reduction in concession fees. Without the lower prices the rapid market penetration would never have been achieved as the vast majority of the growth has been in the pre-paid sector. The government has extra money from (1) concession revenue, (2) extra VAT, (3) corporate tax. Surely, they should take these factors into account as opposed to just the reduced concession fees?

the government received each year from the reduced percentage of concession fees. . How can they argue that it cost the state 71.7 billion baht? If the concessions were left the same, AIS would have smashed DTAC in the pre-paid market. They would have had a virtual monopoly given their pricing advantage.

Also, what about the benefit to the consumers from cheaper prices?

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