Thai's Telecom Market Country Study - Report


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Thai's Telecom Market Country Study - Report

  1. 1. Wireless Infrastructure Deployment & Economics Homework 1 – Country Study: Thai’s Telecom Market This document is public version of the submitted report. Please contact the author for download / correspondent query. Author : Laili Aidi Part A. Telecom market key actors and their characteristics At present, Thai’s telecom sector is dominated by mobile communications [19]. As of March 2011, the mobile cellular user reaches 98 million (world rank 13) and the penetration rate was estimated at 107.86 % over 66.7 million population [1]. In 2009, the Internet host and Internet users are around 1.335 million (world rank 37) and 17.483 million (world rank 33) respectively [2]. And the demand of mobile Internet continues to rise due to limited fixed-line and landline infrastructure. The sections below present the overview of several key players in Thai’s telecom market and their profile: a. Telecom Regulator The Thai’s telecom business is governed by 2 main acts and independent regulatory bodies: 1. National Telecoms Commission (NTC), responsible for Telecoms business (Telecoms Act), has a policy-making role in formulating a master plan on telecommunications development. 2. National Broadcasting Commission (NBC), responsible for frequency allocation, supervision of radio and television broadcasting business (Frequency Act). In December 2010, It is has been planed that NTC and NBC shall form a single independent regulatory body, National Broadcasting and Telecommunications Committee (NBTC). This body will regulate the entire telecommunications sector including voice, content, licenses, spectrum management, supervising network usage and network connection, networks and equipments standard control, consumer protection, ensuring fair competition, and enforcing the law [19]. However, until now NBTC still has no appointed members yet and it is uncertainty when the appointment will be made, as until now it is still took care by NTC. b. Mobile Network Operator (MNO) There are currently six MNOs in this mobile telecom market, as briefly shown below: Table 1. Thai’s MNO’s Profile Summary MNO Shareholder(s) Network Technology NoteAdvanced Info • Shin Corporation (43 %) GSM, EDGE, The 3G service is non- Service (AIS) • Singtel Strategic UMTS, HSDPA, HSPA+ commercial beta test [6, 8, 10] Investment (21 %) [10]. (900 and 1800 Mhz) Total Access • Telenor Asia (41 %) GSM, EDGE,Communication The 3G service is non- • Thai Telco Holdings (15 UMTS, HSDPA, HSPA+ (DTAC) commercial beta test %) (800 and 1800 Mhz), [3, 6, 28] • Brand name “True Move” True • TelecomAsia (58.2 %) GSM, EDGE, • 3G services is non- [6, 8, 17] • Thai NVDR (5.26 %) UMTS, HSDPA, HSPA+ commercial beta test • Hutchison Whampoa (55 • Brand name “Hutch”Hutchison CAT %): marketing and service CDMA2000 1x and 3G • 3G services is legally [9, 14] • CAT Telecom (45 %): CDMA2000 EV-DO commercial service network operator • The newest player in the 1
  2. 2. Wireless Infrastructure Deployment & Economics Homework 1 – Country Study: Thai’s Telecom Market market • Brand name “TOT3G” • Ministry of finance) • The first mobile 3G • Ministry of Information Telecom of operators in Thailand and Communication UMTS, HSDPA, HSPA+Thailand (TOT) [8] (officially) Technology: network • State-owned telecoms operator company • Brand name “CAT • Ministry of finance) CDMA” • Ministry of InformationCAT Telecom [6, 3G CDMA2000 EV-DO • 3G services is legally and Communication 8 12] Rev.A commercial service Technology: network • State-owned telecoms operator company Moreover, the table 2 below contains the detail data of the 3 biggest MNOs from the mentioned above, including their total Active Mobile Subscriber, Market share / cap, total Revenue, and Net profit. From this table, It is clearly can be seen, despite the increasing number of the Market cap, these MNOs look like will have declination in their Revenue, as the data taken from Q3/Q2 2011 is still far away from the 2010 Revenue. But they seem to be able to catch the Net profit, at least, make it close to the last year stage, as in Q2/Q3 2011 these MNOs already achieve more than half of 2010 Net profit. From this data, it can be concluded that these MNOs are taking action to enlarge the operating margin through low OPEX and CAPEX. Table 2. 3 Biggest Thai’s MNOs Financial Summary True AIS DTAC (True Move) Matrix / [4, 8, 10] [3, 8, 11] [5, 17, 18] Operator Q2/Q3 Q2/Q3 Q2/Q3 2009 2010 2009 2010 2009 2010 2011 2011 2011 Active 32.3 22.9 17.9 Subscriber 28.8 31.2 19.7 21.6 - 17.1 (44%) (30%) (24%) (Million) Market Cap 256.5 252.5 371.6 84.7 99.5 159.2 21.7 55.2 58 (Million Baht) Revenue 103.2 112 62.6 65.7 72.4 39.8 22 21.9 14.9 (Million Baht) Net profit 17.1 20.6 12.4 6.6 10.9 9.4 1.2 2 1.4 (Million Baht) c. Mobile Virtual Network Operator (MVNO) All the MVNOs in Thailand run in incumbent network, TOT [6]: I-Mobile 3GX (Samart I-mobile plus), I-Kool Real 3G (Loxley), MOJO3G (Mconzult), IEC3G (IEC), and 365 3G (365 Communication). d. Mobile Phone Company 2
  3. 3. Wireless Infrastructure Deployment & Economics Homework 1 – Country Study: Thai’s Telecom MarketThere is a mobile phone company from Thailand, called NewTel Corporation, which produces anddistributes the smart phones, running Android OS with brand name Wellcom [18].e. Mobile Telecom Outsourcing Company1. Provide distribution services (starter kits, refills vouchers, wholesale and retail outlets): UD, Happy Online (online distribution for DTAC)2. Provide operation, maintenance and repair services for infrastructure:3. Provides the phone card: Telecard Corporation Company Limited, Lenso Phonecard Company Limited, etcPart B. Main challenges for the key actors There are several key challenges in this market, as it has the most complex telecom marketenvironment as a result of interlocking investment structure, lease-based infrastructureconcessions, and government intervention [7]. Previously in Thai’s telecom business, thegovernment owned telecom authorities, control all the wavelengths, and use TOT & CATTelecom as the ex-gate-keeper of the industry [14]. But, because these 2 companies alone couldnot expand their services to meet the demand, the Build-Transfer-Operate (BTO) concessionswere used and granted to private companies (private MNO), as investors of network constructionand service providers [17]. These concessions allow private MNOs and MNO concession providers to share telecommonopoly benefits by revenue / profit sharing scheme. But, the private MNOs are not allowed tohave its own physical network assets, indeed it must set up agreement with concession MNOproviders for exclusive right to operate, maintain and carry out investment for a given number ofyears, and will in turn be paid an agreed fee to its concession MNO providers alliance. This modelactually become core competency and main profit at each of these MNO concession providers. Forexample, over half of CATs revenue comes from its mobile concession contracts with DTAC,True Move, and Digital Phone Company (DPC, GSM1800 Brand) [17]. Below are the several global key challenges that are faced by the Thai’s telecomstakeholder, especially the MNOs/MNVOs in relation with the regulation form mentioned aboveand the market condition: 1. Uncertainties in regulation and policy The telecom industry is under transitional period and there are uncertainties on regulationand supervision. The reform of the Thai telecom sector has led to major changes in the provisionof services (technology and related regulations). After 2006 coup détat, the governmentannounced plans to merge TOT with CAT Telecom to operate a Telecom Pool so the new systemwill create more competitive environment driving growth. But after the 2008 election, successivegovernment abandoned this and continued liberalization process. As there is still unclear when theNBTC will have appointed members, It will be hard to predict the policy and direction in whichthe NBTC will regulate the telecom business, as well as the enforcement of legislation andregulations [10, 11, 17]. This may adversely affect the MNOs/MNVOs’ ability to implement itsstrategy or adapt to any changes in market conditions. Furthermore, the NTC have arranged 4 licenses to operate 3G UMTS/HSDPA networks onthe 2100 MHz spectrum (IMT 2100), but political and laws prevented the auction as CATTelecom claimed it does not have authority to hold the auction. The auction was stopped in 2010,resulting in near guarantee of incumbent domination to exploit 2G services, as only governmentowned MNOs are allowed to roll out 3G. Until 3Q11, many MNOs have settled new base stations 3
  4. 4. Wireless Infrastructure Deployment & Economics Homework 1 – Country Study: Thai’s Telecom Marketto unlock the limited data capacity in their current 2G network. However the upgrade has beenpending due to this regulatory issue and investment remains. Until the NBTC is formed, it isunlikely new round of the auction is going to be arranged [10, 11, 17]. Later on, this suspensionorder paved way for incumbents to undertake rent extracting activities rather than directinvestment as CAT sold its 3G right to its concessionaire (True Move), while TOT to its MVNOs. There are also restrictions on foreign ownership in this market. Any breach of theserestrictions may result in licenses revocation / contract termination / render the MNOs/MVNOsunable to operate its business pursuant [10]. The term “foreigners” is defined to include a publicor private company, in which non-Thai nationals hold more than 49 % of its registered capital, orin which more than half of its shareholders are non-Thai national. No regulatory body has yetestablished a guideline that can be used by MNOs/MVNOs to evaluate or assess the impact of theenforcement or interpretation of the provisions. 2. Highly competitive & saturated voice market Thai telecom market is highly competitive, sensitive to price competition, and remains instable contest due to saturation in voice market [10, 11, 17]. The drivers that could increasesubscribers are from surging multiple-devices and data-SIM users, growing M-to-M enterprisemarket, and organic growth from rural segment. The data services would continue to be thegrowth engine, as demand of mobile Internet continued to rise, trend of social networking, andaffordable lower-end smart phone. This handset business would be key to support data services, aswell as applications to accommodate multi-operating systems, and local contents, etc. As theARPU is very low, operator has to keep focus on operational efficiency to enlarge the operatingmargin through low OPEX and CAPEX. The MNOs/MVNOs may also face increasingcompetition from new market entrants, as the regulatory reform to liberalize the market, as well asthe introduction of new technologies or improvement the existing (3G currently is still in earlyphase). Thus, the investment, operation, and marketing spending tend to rise, coupled with varioushandset campaigns. Failing in investing and predicting the change in market behavior, maydecline the competitiveness and lowering the levels of customer satisfaction. 3. Operation and maintenance failure Thai telecom market imposes to higher challenge in risk assessment and managementsystem, for example the natural disasters (Tsunami, H1N1 influenza, floor disaster) that can leadto reduction in the number of tourists, as well as causing damages to infrastructure in certain areas.Moreover, currently most of the MNOs corporate with third parties to maintain, operate and repairtheir devices, network infrastructure, distribution, etc (see the “Mobile Telecom OutsourcingCompany” section). If these companies are unable to perform its obligations under the agreement,or in timely and cost-effective manner, or failure / delay in paying the transaction income fromdistribution channel, the MNOs may have to bear higher operating costs, decrease the revenues,speed and quality of the services, loss of customers, etc. 4. Global economic situation Thai economy has recovered significantly since the effect from 1998 global financial crisis.But, this market is still affected by other negative factors within/outside the country, such as theslowdown in the manufacturing, unemployment, political tension, export, and tourism sectors.These factors have a material adverse effect on consumers’ income, purchasing power, spendingbehavior, level of confidence, as well as the mobile phone service industry through reduction inmobile phone usage and increase risk in mobile phone service fees (post-paid package customers).Moreover, the principal revenues of the MNOs/MVNOs are denominated in Thai Baht currency, 4
  5. 5. Wireless Infrastructure Deployment & Economics Homework 1 – Country Study: Thai’s Telecom Marketbut there are parts of their expenditures are denominated in foreign currencies. Thus, significantfluctuation in rate exchange would lead to financial effect.Appendix - Reference(s)[1] CIA the world fact book factbook/fields/2150.html#th [Oct. 28, 2011][2] CIA the world fact book – Thailand factbook/geos/th.html [Oct. 28, 2011][3] DTAC TOTAL ACCESS COMMUNICATION PUBLIC COMPANY LIMITED SET [Oct. 28, 2011][4] ADVANC ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED SET [Oct. 28, 2011][5] TRUE: TRUE CORPORATION PUBLIC COMPANY LIMITED SET [Oct. 28, 2011][6] Internet in Thailand [Oct. 28, 2011][7] True Q2 Report 2011 [Oct. 28, 2011][8] List of mobile network operators of the Asia Pacific region [Oct. 28, 2011][9] Hutchison Telecoms International Limited [Oct. 28, 2011][10] AIS Annual Report 2010 [Oct. 29, 2011][11] DTAC Annual Report 2010 [Oct. 29, 2011][12] CAT CDMA [Oct. 29, 2011][13] CAT Telecom [Oct. 29, 2011][14] Thailand Telecommunication Key Players 3A52-4A3A-AE14-2A488A5CE50B.htm [Oct. 30, 2011][15] TOT (Thailand) [Oct. 30, 2011][16] Telecoms in Thailand [Oct. 30, 2011][17] True Annual Report 2010 [Oct. 30, 2011][18] Wellcom [Oct. 30, 2011][19] 2008 Telecommunications sector 1177475763598/3714275-1234408023295/5826366-1234408105311/chapter4- telecommunication-sector.pdf [Nov. 3, 2011] 5