I’m still catching up with reading after a week and a bit offline but will be highlighting pertinent items I missed during the period in forthcoming blogs. Posts will likely to be shorter than usual on analysis, else I’ll never beat the backlog.
First up, Developing Telecoms has a must read on the Thai telecom industry and its many issues – Stuck in a rut: Thailand’s telecom sector is crying out for reform.
I never post articles in full but, on this occasion, I’ve include in it its entirety as it is a worthy read from start to finish.
With Thailand beset by ongoing political problems on top of a sluggish economy, the country’s telecom sector seems to have lost direction.
After almost a decade of strong growth in its telecom sector, Thailand was hit by a serious economic downturn in 2009 as a consequence of the global financial crisis. At the same time the country’s ongoing political problems were also continuing to have a negative impact on the national economy, with a significant downturn in investment being a major concern. Not surprisingly, demand for mobile services cooled in 2009 and this continued into 2010. In the meantime, mobile penetration had managed to pass the 100% penetration mark.
Passing 100% does not, of course, mean that everyone owns a mobile phone, more than there are more ‘active’ SIM registrations than people. Impressive though it sounds, this statistic is often misleading in markets where pre-pay (pay as you go) tariffs dominate as many people have registered or use more than one SIM.
SIMs typically remain active for months, or perhaps years, which means the penetration rate does not, typically, reflect usage rate. Yet the increase in Thailand does demonstrate a growing consumer interest in mobile phones, which is likely to translate to more smartphone purchases this year.
Growth in the mobile market was expected to pick up once more in 2011, although there would be no return to the boom years. Fixed-line development was virtually non-existent, despite the government’s keenness in promoting this. There had been some interesting activity however in the broadband Internet market but this was essentially high growth off a relatively small base. The good news was that the surge in broadband which started around 2007 is continuing.
In the wider telecom sector, there was a feeling that a loss of direction was creeping into the market. If any one thing characterises the Thai telecom industry, it is probably the stop-start approach to sector reform and re-regulation. An important step was taken with the Telecommunications Act being adopted as law back in 2000, but the government moved slowly on the implementation of this legislation. Most critically it was not until 2004 that the National Telecommunications Commission was finally set up and working. Some good work was subsequently done in the regulatory area; but the industry continues to be frustrated by delays in reform; the uncertainty that these delays create has been the big concern.
The National Telecommunications Commission has been trying hard for many years but the regulatory environment has not had a sustained period of consistent policy since the commission was established. In the meantime, one of the urgently needed reforms, the long-awaited restructuring of the two state-owned operators, TOT and CAT Telecom, continues to be postponed. This means that the critical task of concession conversion has also been put on hold.
To give further assessment of just how important the state-ownership issue is, this lack of reform has arguably been a key driver in the country’s 3G chaos. CAT was very much influential in holding up the most recent auction attempts, while TOT has regularly opposed progress too. Unsurprisingly, after helping halt the auctions, both operators stand to benefit substantially (both financially and asset-wise) from 3G deals negotiated this year.
By 2010, the National Telecommunications Commission was starting to look very much like a lame duck regulator with the government finally moving to create the National Broadcasting and Telecommunications Commission. Although this new authority is not likely to be operational until late 2011 and will take time to get up to speed, the National Telecommunications Commission is finding it increasingly more difficult to carry out its role.
The biggest setback was the failure of the National Telecommunications Commission to hold the 3G auctions and to issue these long-awaited licences. The situation with respect to 3G was proving to be a national embarrassment for Thailand. There were also serious concerns in some quarters that the new regulator when finally installed would not be a truly independent authority.
With TOT and CAT arranging deals which will likely bring 3G to Thailand this year, it remains to be seen whether the NTC will get the auctions going before mass market 3G becomes available making the auctions somewhat obsolete.
Looking at the situation in the most positive light, securing the NTC’s position as the driver of future auctions and telecoms regulation may help minimise potential disruption in the future, but damage has already been done and, as the most recent events in Thailand’s ongoing 3G debacle testify, CAT and TOT’s influence and position must be addressed urgently.