The mobile telecommunications industry in Thailand is both dynamic and undergoing a period of profound change. This article takes a look at the current Thai mobile landscape and investigates what the future holds in store for a country where mobile ownership is still in its infancy.
Someone who knows something about the mobile phone scene in Thailand, but for all the wrong reasons, is world champion golfer Tiger Woods. Back in 2000 he was well on the way to winning his next several million at the Johnnie Walker Classic in Bangkok only to have his concentration broken several times by the cacophony of myriad handsets going off in the crowd and the subsequent oblivious loud conversations. Apparently Woods backed off his putt several times, giving long, hard glares at the overtly auditory audience. I doubt Mr Woods ire would have been eased had his caddy explained to him that his audience consists of 25-49 year olds who just coincidently happen to be the highest users of mobile phones in Thailand and that, in actual fact, about 90% of Thailand's 62 million people have yet to discover the wonders of wireless.
Whilst in other Asian countries mobile ownership has spread to all sectors of the community, mobile penetration here is curiously smaller than the Philippines where per capita income is barely half of that of Thailand. A recent report by the Thai Development Research Institute might have the answer. It revealed that mobile markets in the Kingdom are "under-competitive and dominated by a small number of players resulting in a lack of competition compared to the markets in neighbouring countries". The survey also found that Thais pay more for their cellular phone services than other Asian nationals. As an example, based on the same call volume of 200 minutes per month, local users will pay between Bt1, 164 and Bt1, 242 monthly whilst Singapore Telecom users can talk to their hearts content for the equivalent of Bt682. Why the 'rip-off'?
Until now the Thai wireless market has somewhat resembled a private golf club open to privileged members only. It's dominated by just two main players that between then control approximately 90% of the market. One is Total Access Communications (DTAC) of which 40% is owned by Norwegian telecomm company Telenor and the other is Advanced Information Service (AIS), a joint venture between Singapore Telecommunications and Shin Corp, a company belonging to Thai Prime Minister Thaksin Shinawatra. AIS's network covers about 90% of the country but DTAC's only roughly half, leaving an awful lot of people with a choice of only one network - if they can afford it. That's not to say competition between the two has not been fierce where the two networks overlap. Just last year Boonchai Bencharongkul, Chairman of DTAC got down and dirty in a paddy field in order to publicise the Company's campaign to persuade the country's 43 million farmers, most of whom had managed to scrape by withou t SMS, that a mobile was just as essential as a good harvest. By introducing low cost mobile phones and a new pricing structure, DTAC almost collapsed under the 30,000 new customers joining every day. Not to be outdone, AIS also slashed its rates and the two between them added more new customers at the end of 2000 and beginning of 2001 (1.8 million) than in the previous four years combined. Unfortunately their already overworked networks were not prepared for such an onslaught and began to buckle under the pressure of so many new users resulting in complaints of dropped calls and billing problems.
To their credit both are doing their best to improve infrastructure. AIS have invested heavily in network upgrades by signing a deal worth over U$50 million with Nokia to expand and improve its GSM network. Nokia will supply AIS with GSM radio and core network equipment, including Nokia Ultra Site base stations, base station controller upgrades, a mobile switching centre and all the other GPRS, EDGE and WCDMA paraphernalia needed to support AIS's 7 million subscribers.
Regardless of better networks and lower prices, a choice of two is not much of a choice at all. That's what the marketing men at UK mobile giant Orange must have thought when, in collaboration with Thai conglomerate CP Group, they decided to cut themselves a slice of the Thai wireless pie and grab a 34% stake in Wireless Communications Services, another of the country's smaller mobile companies. CP Orange's opening shot across the bows of this cosy duopoly has been to award a $2 million contract to Gamma Projects for the building and management of a GPRS network, the first of its type in Thailand. CP Orange will use Gamma Project's Net One software for building and managing a GSM 1800 MHz wireless system on which it will offer a range of 2.5G services under the Orange brand name.
The arrival of Orange marks the beginning of the end for a mobile market seen by many as stifled by state regulation and market protectionism. But all that is set to change by 2006 when the entire industry is to be de-regulated and liberalised. The Thai government is setting up the National Telecommunications Commission to make sure that the cosy status quo disappears like a golf ball being sliced into the wide blue yonder.
Unfortunately, a delay in its implementation has put the entire industry into a state of flux and uncertainty. Until this new overseer is up and running and has declared its plan of action, no one knows what the new lie of the land will be and how best to prepare themselves. What is known is that current state concessions granted to the existing mobile companies by the Telephone Organisation of Thailand (TOT) and Communications Authority of Thailand (CAT) will be converted to licences in a bid to set existing telecom players free from state constraints and allow them to compete on the same footing as any new provider that fancies its chances. One thing is for certain, the two government owned authorities are also to be cut loose from the state apron strings and left to fend for themselves on the newly open market. Whether they flounder around in the rough or come out fighting with a set of shiny new golf clubs is the subject of much speculation in the Thai press.
Both are seen as lumbering, over-staffed and complacent state fat cats who have accumulated between them a portly bt368 million, mostly through the revenues they rake in from their concessions. Such a nice little earner has made them content to sit back on their laurels and let the money role in. "None of the executives (of the TOT or CAT) has marketing experience. They may know how to cut costs but not how to generate revenue," said a former CAT executive. But generate they must if they are to survive, to which end TOT is launching its own 1900 MHz cellular phone service to compete with the likes of AIS, who are already the country's largest mobile operator.
One idea floating around is for TOT to commercially offer its existing base stations across the country to other mobile phone operators who would then use TOT's maintenance service. Some feel the only way each can survive is with a merger so they have a bigger stick to shake at competitors. The latter scenario seems far from possible. Despite both having the same owner - the government of Thailand - they are bitter rivals who seem set to launch competing mobile services. According to some pundits, such competition could destroy both of them because each will have to start fresh in a market already dominated by their own concessionaires. In business terms, the merger makes a lot of sense.
But if pride in their independence doesn't prevent a shot gun wedding, politics just might. The Prime Minister's family owns AIS and other private telecom services which could create a conflict of interest at the highest level and leave the two agencies little room for manoeuvre. Already an attempt to create a level putting green by allowing the two agencies to retain all the financial benefits promised to them by the private telecom firms is being sabotaged by the concessionaires themselves who have lobbied to retain large chunks of the revenue that would have gone to the state agencies. Additionally, both sides are claiming ownership of the networks and subscribers after privatisation, though present industry opinion is that the private firms will win possession.
Worse still, where once investment in these monopolies, whose revenue was more or less guaranteed, seemed attractive to foreign speculators, they may now look elsewhere for a Thai partner more used to the cut and thrust of competition. Some say both could end up being taken over by the likes of AIS or DTAC but as far as DTAC is concerned, it would regard other fixed line private firms such as Thai Telephone and Telecommunications Plc a much juicier prospect because it shares a common private organisation culture.
Continued in Part 2
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