Thailand’s Amazing Mobile Spectrum Capacity Sale

MVNOs pushed out of business

State enterprise telecom operator TOT and the mobile operator Advanced Info Service (AIS), is about to seal a 10-year deal which, would bring about a series of issues for the Thai telecom sector.

The deal is the second sellout of state enterprise spectrum capacity to a telecom operator, It follows a similar deal between the other state enterprise telecom operator, CAT Telecom and third ranked mobile operator TRUE – and yet another deal is in the making on TOT’s 2300 MHz spectrum.

The AIS-TOT 2100MHz deal

The deal, was in fact already approved and concluded in December 2015 between AIS and TOT, according to transcripts from AIS conference call on the 900MHz auction.

TOT’s 2100MHz 3G service consists of 15MHz bandwidth, running on just 5,320 base stations. Given the current usage pattern in the Thai market, this provide TOT’s network with a capacity to serve approximately 7 million users.

Under the 10-year partnership deal currently in the making with Advanced Wireless Network (AWN), a subsidiary of the mobile market leader, AWN would be allowed to rent up to 80% of TOT’s 2100MHz network capacity until 2025.

The remaining 20% of the network capacity would be reserved for TOT to provide its own service, and wholesale to MVNOs.

As the capacity today on TOT’s 2100MHz is approximately 7 million users, and AWN will be allowed to rent 80% (5,6 million users), the remaining 20% capacity available to TOT, and the MVNOs will only be 1.4 million users, a limitation which would be, of little to no interest to a MVNO, let alone several.

AWN will pay TOT THB 3.9 billion per year for the capacity rental, which equals THB 58 per user (5.6 million users) per month. Prepaid average revenue per users (ARPU) at AIS end of 2016 was THB 186 per user/month, while postpaid ARPU was THB 600 per user/month.

Modelled on the controversial 850MHz deal between CAT Telecom and TRUE

The AIS/TOT agreement is modelled on the controversial 850MHz partnership between the other state enterprise telecom operator, Communications Authority of Thailand (CAT Telecom) and the mobile operator, TRUE.

CAT Telecom holds an operating license for 15MHz of the 850MHz spectrum frequency band. But In January 2011, CAT Telecom and a range of TRUE subsidiaries, signed an agreement giving TRUE a 14-year contract under a “wholesale and reseller partnership” with the state enterprise.

In the setup, CAT Telecom outsource the network operations and management to “BFKT” (a TRUE Group subsidiary). “BFKT” build and operates the 3G network infrastructure. CAT Telecom then leases the 3G network infrastructure equipment from “BFKT”. Another of TRUE group’s subsidiaries “RealMove” then buys 80% of the network capacity to resell under its True Move H brand

Figure 1: CAT Telecom and TRUE’s 850MHz setup

CAT Telecom TrueMove MVNO 850MHz Setup

CAT-TRUE 850MHz deal breaches five telecom-related laws

In April 2012, after spending almost a year investigating the deal, a committee set up by the National Anti-Corruption Commission (NACC) ruled unanimously, that the controversial network deal between CAT Telecom and TRUE breached several parts of five telecom-related laws, including frequency allocation, telecom business, trade competition and public-private joint venture laws.

The verdict was follow up in June the same year, when the National Broadcasting and Telecommunications Commission (NBTC), announced that the CAT-TRUE 850MHz setup, violated Section 46 of the Frequency Allocation Act of 2010, which requires license holders and spectrum owners including CAT Telecom, to manage the spectrum rights on their own.

The committee found seven points in the CAT-TRUE setup, in need of amendments.

  • CAT must use the 850MHz frequency on its own equipment and devices
  • CAT must have full management control over its network operations center.
  • Mobile data usage and call detail records (CDR) must be in CAT’s possession.
  • The contracts must indicate clearly that CAT has the authority to manage spectrum.
  • The contracts must allow CAT to be the sole decision-maker on frequency planning, network rollouts and service operations.
  • CAT must have the authority to negotiate with other operators over inbound roaming and interconnection charges.
  • The contracts must stipulate CAT is solely responsible for spectrum control.
Commissioner foresaw the AIS/TOT deal four years ago

Beside CAT Telecoms part in the setup, the NBTC investigated whether the TRUE subsidy BFKT was violating Sections 7 and 67 of the telecom law, by operating the network-rental service under the contracts without an NBTC license.

However a year later in April 2013, five members of the NBTC’s telecom committee voted 4-1 in favor of the contracts involving the network rental service of BFKT, saying they did not fall under Section 4 of Telecom Business Act.

Mr. Prawit Leesathapornwongsa was the only commissioner to vote against the contracts. Mr Prawit told Bangkok Post, that the decision may spur mobile leader Advanced Info Service (AIS) to make a similar pact with concession owner TOT for the right to run mobile services on the 2300MHz frequency for 14 years.

Update April 19, 2017 the latest chapter in a long-running saga: NBTC suggests calling the cops on CAT Telecom over illegal spectrum allocation

Still under investigation for THB 45.8 billion and unaccounted base stations

The CAT-TRUE case surfaced again in December 2015, when a report by the State Audit Commission under the Office of the Auditor General (OAG) into the controversial setup, identified at least THB 45,852 billion (U$1.27 billion) of damages, as well as cell sites that had not been accounted for.

TRUE subsidiary BFKT, which was contracted by CAT Telecom to build the network, missed the rollout target of 13,500 base stations on 31 December 2012, and according to the contract should have been fined THB 2.36 billion (U$65 million). However, CAT Telecom only fined BFKT THB 2.02 billion (U$56 million) and even then, the fine has not been paid.

BFKT has since rolled out in excess of 13,500 base stations, and there has been no payments to CAT Telecom and no negotiations as how to deal with the extra base stations. The 2100MHz agreement between AIS and TOT also stipulates that AWN must construct an additional 10,000 3G base stations nationwide for TOT, however no timeline or terms have been shared in public.

Professor Chaisit Trachoetham, Chairman of the State Audit Commission Office of the Auditor General of Thailand, said a committee had been set up to identify individuals at CAT Telecom responsible for the losses so that further disciplinary action, civil lawsuits and criminal lawsuits may be taken.

New 4G deal but not for MVNOs

CAT Telecom’s share, of its own 850MHz network has a capacity to serve at least 4 million customers. CAT Telecom’s own service “MY” occupied 1.6 million subscribers at the end of 2016, which leaves a capacity of around 2.4 million available users to CAT Telecom’s MVNOs.

In September 2016, CAT Telecom announced its plan to launch 4G service as part of its “MY” brand mobile phone operations. The new 4G deal will utilize the True Move H network of TRUE, after CAT Telecom and TRUE reached a new network deal.

The 4G roaming deal is part of CAT Telecom’s agreement with the TRUE subsidy, True Move H Universal Communication (TUC), which will see TUC paying a total rental fee of THB 9.3 billion to CAT Telecom for the use of its 850MHz network.

TUC will pay THB 4.1 billion in cash within 8 years, and the remaining THB 5.2 billion will be paid to CAT Telecom in the form of 4G network capacity on TRUE’s 1800/2100MHz band, within 10 years.

According to TUC’s conditions in the agreement, the 4G network is exclusively for CAT Telecom’s “MY” service and therefore none of the MVNOs will be able to use it.


CAT Telecom and TOT are the only two mobile network operators in Thailand hosting MVNO’s. This leaves the existing and coming MVNOs with a max capacity of: 2.4 million subscribers on CAT Telecom’s 850MHz network and 1.4 million subscribers on TOT’s 2100MHz network, a total of 3.8 million.

The regulator, NTBC has so far issued 43 MVNO licenses in Thailand – only 8 are active.

All three operators (AIS, DTAC and TRUE) have a clause in the terms and condition in their own 900/1800/2100MHz licenses, stipulating:

The Licensee shall provide telecommunications network service of at least 10 percent of its network’s capacity to MVNO(s). The Notification requires the licensee (Type III mobile operators and mobile operators under concessions) – to treat Mobile Virtual Network Operators (MVNOs) on a fair, reasonable and non-discriminatory basis.

The MVNO capacity clause, was first added to the 3 x 2100MHz licenses in 2012, and now almost 5-years later, there are still no MVNOs operating on AIS, DTAC or TRUE’s 2100MHz networks.

The MVNO clause was also added to the recent 2 x 900MHz and 2 x 1800MHz licenses, auctioned in 2015 and 2016 with AIS and TRUE securing both a 900MHz and 1800MHz license each.

MVNO failure

The introduction of MVNOs in Thailand seven years ago has not succeeded in laying the foundation to ensure the achievement of the broader industry and economic objectives.

MVNOs in Thailand have failed because of:

  • Regulatory failure,
  • Poor planning and execution,
  • Legacy systems and red tape,
  • Lack of a proper MVNO policy,
  • Insufficient network capacity at launch,
  • Insufficient MVNO experience and quality,
  • Lack of wholesale contracts understanding,
  • No MVNOs being able to launch on AIS, DTAC or TRUE.
Regulatory failure

Likewise, the Thai regulator and telecom operators also lack fundamental skills and understanding regarding MVNOs e.g. wholesale pricing structure towards MVNOs, basic fundamentals in wholesale contracts, as well as being able to determine the value proposition of MVNOs.

The lack of action from the regulator (NBTC) has been noticed, and in April last year, the Inspection and Evaluation Commission (locally known as the “Superboard”), concluded that the NBTC had failed to regulate and foster more competition by promoting newcomers to the telecom industry.

The Superboard found that there were still only three incumbent operators: AIS, DTAC and TRU, and that the NBTC should issue regulations for mobile virtual network operators (MVNO) to support more of them in the industry, which would benefit consumers.

Nothing has happened since and the opposite is about to take place.

NBTC seems incapable of performing its duties when operators, who haven’t lived up to the terms and conditions set forth in their licenses on providing 10% capacity to MVNOs on their network – can purchase capacity without any intervention or conditions from the regulator. Even more so, when the capacity the operators are buying now, is the only capacity the MVNOs are able to use/using.

TRUE/CAT 850MHz, AIS/TOT 2100MHz – is DTAC/TOT 2300MHz next?

The telecom regulator (NBTC) is about to give TOT the green light to upgrade 90MHz unused bandwidth on their unlicensed 2300MHz spectrum. TOT is currently asking the telecom operators to propose plans to enable the 2300MHz network, and to commit to leasing minimum 60% of the network’s capacity.

TOT will use the remaining capacity to provide its own service and allocate the spare capacity to mobile virtual network operators (MVNOs).

AIS, DTAC, TRUE, MobileLTE and Tantawan Telecommunication are expected to take part in the selection process. DTAC has already admitted a strong interest in securing this partnership with TOT and is awaiting a request for proposal (RFP) from TOT.

TOT is a 5.58% shareholder in DTAC.

The state enterprise operator expects to announce the winner by May 2017 and sign a deal by Q3, with the winner starting installation of the network in Q4.

The winner must build the 4G network on the 2300MHz spectrum nationwide for TOT, with 1,769 base stations in the first year of operation, increasing to 8,455 (Year 2), 14,994 (Year 3), 20,367 (Year 4) and 21,217 base stations in year 5.

TOT hopes to gain THB 3.9 billion in net revenue a year from the 64MHz on the 2300MHz spectrum, similar to that received from its partnership with AIS on TOT’s 2100MHz spectrum.

Update April 19, 2017: Regulatory uncertainties pave a rocky road for Dtac and pretty much everyone else

Oligopoly and gatekeepers = no business

How is it possible that AIS, (DTAC) and TRUE – all operators with significant market power (SMP), can be allowed to buy their way to such amount of spectrum capacity from state enterprise operators, without any kind of regulatory intervention and conditions?

Oligopoly, where a small number of firms controls the large majority of market shares, limits the access to available capacity for other entrants.

Doing so, the operators act as gatekeepers to the essential radio network access needed by MVNOs. Where one would anticipate it was the regulator NBTC, which should retain the gatekeeper role, and prevent the operators exercising such power in the market.

MVNO is a margin business, and its success depend on its ability to sustain low operating cost through efficiency and economies of scale, with the latter depending on the MVNOs ability to differentiate its service offer and attract enough customers.

Not only have the operators managed to avoid MVNOs on their networks for 5-years, but with the CAT/TRUE and AIS/TOT deals, they are further limiting the MVNOs economies of scale by restricting their capacity and thereby available market share, to the point where it is not sustainable.

Although this could be brushed aside as being speculative, the proof is however evident in the fact, that no MVNOs have launched on AIS, DTAC or TRUE – and secondly the conditions in the agreement between CAT/TRUE, that the 4G network is exclusively for CAT Telecom’s “MY” service and therefore none of the MVNOs will be able to use it.

To make matters worse, TOT president Monchai Noosong told a news conference In November 2015, that TOT was considering choosing another operator to lease the remaining 20% of its 2100MHz.

Loxley Pcl, a runner-up in TOT’s shortlist for potential partners, may take up the rest, he said. Loxley has joined with a unit of China Telecom to jointly propose being a strategic partner of TOT. Loxley Pcl is also the company behind “i-Kool”, which is one of the two MVNOs left on TOT’s 2100MHz.

Which raises an important question. If TOT is ready to sell all its capacity, why give them spectrum in the first place? Why not give the spectrum back to the NBTC for re-auctioning?

Bleak consequences

If the AIS-TOT (and CAT/TRUE) deal is given the approval with no regulatory intervention, It will signal that those with significant market power (AIS, DTAC and TRUE) are able to buy their way to capacity – and thereby influence, in a market considered to be “mobile first”.

Interesting, considering the same regulator (NBTC), is strict when it comes to the limitation of share ownership in the Thai broadcasting industry, to avoid companies being able to buy influence.

As the available MVNO capacity will be limited, the large foreign brands MVNOs, who have had an eye out for the Thai MVNO market will look to other, more MVNO friendly markets. This includes Internet of things and M2M projects, in which MVNOs are – and have been pioneers and innovators.

Less investment in ICT related industries, and limited launch investment in tech and service related start-ups/SMEs, will be the consequence, as the capacity, accessibility and thereby success, will depend on the willingness of three mobile operators to open their gates for market entry first, not normal market forces.

Opposite mobile operators, MVNOs runs a flat agile organization, in which the employees are involved in several aspects and responsibilities of the business, which help them innovate, develop skills and mindsets, which will be in high demand for Thailand 4.0.

As the AIS-TOT deal is modelled on the CAT-TRUE setup, an approval of the AIS-TOT deal, will cleanse any possible wrongdoing in the case of the CAT-TRUE investigation.

Coming spectrum auctions could see a lower interest in bidding or the amount of biddings, as the three operators will be more focused on utilizing spectrum given to state enterprises than the cost of bidding on new license.

MVNOs are intended to support innovation, bridge digital divide, and contribute to the growth in the ICT sector to ensure the achievement of the broader industry and national economic objectives. With Thai consumers’ increasing reliance on data and mobile broadband, the government’s policy on Digital economy/Thailand 4.0 with technology and service evolutions in the industry, there is a need for MVNOs in Thailand.

The clear international evidence in markets with level playing fields, is that MVNOs have proved successful in delivering:

  • More consumer choice
  • Innovative pricing plans
  • Innovative products and services
  • innovation in, and better customer service
  • Disruptive technologies and business models
  • Faster technical, commercial and service innovations

On the other side, NBTC can’t just demand that the operators launch MVNOs, on their network first. It would end up with failure, since one of the main pillars in MVNO success, is a solid relationship with the operator for mutual benefits, not a forced marriage which leaves all sides as losers.

NBTC, as a regulator has a key role in terms of enabling and enhancing – or slowing the development of the Thai ICT market. There are rules, regulations, laws and options available to the regulator to deal with these issues – they just haven’t been activated.

It is important that NBTC recognize its responsibility to encourage a healthy telecom sector in Thailand by ensuring that the mobile network operators treat the MVNOs on a on a fair, reasonable, and non-discriminatory basis and not just with words, but with action.

We need a MVNO policy in Thailand – and we need it fast

Author: Allan Rasmussen
Managing director at Yozzo. Allan is a MVNA/MVNE/MVNO specialist with hands-on experience from more than 60 projects in both competitive and greenfield markets. His expertise includes business case development, execution, launch and growth strategies. Advisor and consultant to mobile network operators, MVNA, MVNE, MVNO, National Regulatory Authorities, Government Agencies, Broadcast Companies, TMT Industry Associations, Innovation and Investment Banks.
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