UPDATED: 12/1: The record amount spent in Thailand’s spectrum auctions could be regarded as a direct result of the telecoms regulator and IT ministry, after so many years and several opportunities, not being able to create a clear spectrum roadmap and legal clarity.
Dominic Arena, managing director of ASEAN-based consultancy AEC Advisory, outlined this analogy: “If I told you that this may be the last time you could drink water for an unknown period, then I offered to sell you a glass of water, what would you pay for it? Infinity plus a bit more, no less! Spectrum is water for mobile operators.”
The high auction prices, which some analysts described as ‘mad’, are simply the result of a lack of certainty because the country appears to have no long-term master plan for spectrum.
“There is little certainty on what is going to be available, and the government has a fundamental inability to understand how much certainty means to investors. This has been Thailand’s problem on many telecoms regulatory fronts,” Arena told Mobile World Live.
Some commentators believe the state-run operators benefit from special treatment, and the country still doesn’t confirm to ITU’s requirement for freeing up the 700MHz band for mobile broadband because the digital TV channels are in the wrong part of the band.
Right before the 900MHz auction in November, the National Broadcasting and Telecommunications Commission (NBTC) gave CAT Telecom 20MHz in the 1.8GHz band, which it can use for its own purposes until the end of the concession period in 2018. The regulator said that was all it could give CAT legally, but CAT could ask the military government to allocate the spectrum until 2025, like what TOT did with the 2.3GHz band.
NBTC recently gave TOT the whole 2.3GHz band until 2025 for free, which is something no one is talking about, Arena said. “CAT is trying to do the same thing, saying it wants the 1.8GHz until 2025. But it clearly creates uncertainty, that’s why dtac was bidding so fiercely in the 900MHz auction.”
Adding to the intrigue, AIS reportedly is about to sign a spectrum-sharing deal with TOT for 15MHz of its 2.1GHz spectrum, which AIS can load onto its existing network. Arena said AIS can potentially do the same with TOT’s 2.3GHz for fixed-wireless LTE.
Because it didn’t win the 900MHz and needs to use the new 1.8GHz for its 2G customers, it needed to find another 4G band, which it has secured from TOT. “AIS had a backup plan and is already working on it, so it is quite far down the path. That’s why it isn’t panicking,” he said.
Looking beyond 2018
That can’t be said for dtac, which is the only one of the three major mobile players not to win 4G spectrum in the auctions. As noted above, the regulator has not been clear if it can keep CAT’s 1.8GHz beyond 2018, which obviously impacts its 4G development plans.
Dtac’s other issue is it is still paying concessionary level fees – 30 per cent – for the 850MHz and 1.8GHz spectrum. While the operator may have enough spectrum for the next three years, it is paying high regulatory fees compared with its rivals. After 2018, it will only have 15MHz of 2.1GHz, which isn’t enough to support its customer base.
Arena noted that 700MHz spectrum is definitely not coming in the next two years. “If I were dtac, I’d be nervous without certainty of a sub-1GHz band the next two years.”
True Move, the winner of both 900MHz and 1.8GHz spectrum, will also struggle as it needs to raise $3.2 billion. The operator has spent billions that it doesn’t have, so it will need to issue new shares and China Mobile will likely boost its 18 per cent stake over the next quarter or two to near the legal limit of 49 per cent.
“It’s the only way for it to survive,” Arena noted.
After the first auction, when True paid $1.1 billion for 1.8GHz airwaves, he said that the price in terms of annual amortisation cost alone is equal to 67 per cent of its current EBT.
Meanwhile, Jasmine International picked up its first tranche of spectrum for $2.1 billion and plans to invest $556 million over the next three years and have two million mobile customers next year.
To put the price Jasmine paid in perspective, Arena said dtac’s market cap, which has dropped 70 per cent from its two-year average and is down 40 per cent over the last month, is just $1.8 billion — less than what Jasmine will spend on its spectrum.
“Theoretically, it could have brought dtac for less than it spent on 10MHz of 900MHz spectrum. That’s how ridiculous the market is,” he said.
Of course, there is no indication that Telenor is interested in selling dtac and recently said it was committed to Thailand for the long term.
Jasmine, a broadband provider, said it would announce a foreign partner before the auction but recently indicated it now doesn’t have one. Arena speculates that its first partner, rumoured to be a South Korean firm, got cold feet because the auction prices were way beyond fair value.
The company wants to rent towers from CAT and TOT but is realising how difficult it is to deal with them, and the CEO has complained that it’s too expensive to rent from CAT and has invited its broadband customers to host mobile towers in a form of crowdsourcing.
Not sure how the regulator would react to Jasmine installing mobile towers in customers’ backyards or on top of their houses, but then no one is sure how the NBTC will react to any pressing regulatory issue.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.