Thailand’s telecom regulator allows the telecom merger between TRUE and DTAC to move forward

NBTC allows the merger between TRUE and DTAC to go forward

After almost a year of delay – the National Broadcasting and Telecommunications Commission (NBTC) has voted to “acknowledge” the merger between Thailand’s 2nd and 3rd telecom operators, TRUE and DTAC.

The board of Thailand’s telecom regulator (NBTC), considered the merger request between Total Access Communication Public Company Limited (DTAC) and True Corporation Plc. (TRUE), at a special meeting today, taking more than 11 hours, with the resolution to “acknowledge” the parties proceed with the merger along with some weak remedies.

Two of the five NBTC committee members voted in favor of the merger: The NBTC Chair, Dr. Soron Boonbaichaipruek – responsible Consumer Protection and Mr. Torpong Selanon (Civil rights and liberty).

Two voted against; Dr. Supach Supachalasai (Economics) and Dr. Phirongrong Ramsut (TV Broadcasting)

"The TRUE-DTAC merger would have severe consequences on the country’s economy and society, with reduced service quality and obstruction to new players in the market. There is a high likelihood of market collusion that would discourage new competitors"
Dr. Suphat Suphachalasai
NBTC Commissioner (Voted against the merger)
"One of the [merger] applicants has a close business relationship with an integrated business group. (Conglomerate) which dominates the market for goods and services at the retail and wholesale level of the whole country. Therefore, there is an opportunity to expand the market by using a collective sales strategy. This results in unequal competition with other operators."
Dr. Pirongrong Ramasoota
NBTC Commissioner (Voted against the merger)

Lt. Gen. Thanaphan Raicharoen (Broadcasting), abstained from voting due to legal interpretation issues.

Due to equal votes, the board Chair Dr. Soron Boonbaichaipruek, exercised his power to cast one more vote in favor of the merger with the lowest margin possible.

DTAC is a subsidiary of Telenor Group who’s major shareholders is the Government of Norway. TRUE Corp’s majority shareholders is CP Group, Thailand’s largest private held company..

Despite massive protest, comments, reports, analysis and plain common sense, it is no surprise that the NBTC ended up allowing the merger. Big conglomerates in Thailand have long enjoyed market power, in a regime that many perceive to be friendly towards the big family companies.

The TRUE DTAC merger will de facto leave the market with only two mobile service providers, Advanced Info Service (AIS) and the merged TRUEDTAC as the gatekeepers and bottlenecks of Thailand’s digital transformation with consumers and businesses paying the price.

The fourth (now third) operator is the state enterprise National Telecom, itself a merger between the two state operators CAT Telecom and TOT. The two was merged into National Telecom (NT) in 2021 and barely has more customers than employees. The operator has no viable business plan in place to create profits and will have to return the majority of its mobile spectrum in 3 years.

There are only 3 MVNOs in the market using National Telecom as a host operator. Combined the three active MVNOs have under twenty five thousands customers (25.000)

With the merger, the market becomes a duopoly between AIS with 45% market share and TRUEDTAC with 53% market share. There may be some competition initially, as the two sides try to conquer market share – but question is for how long, until the two agree that sharing the market between them is better for both.

TRUE and DTAC has brushed away reports and analysis of prices increasing from 25% to 200% depending on how much the two sides will end up colluding after the merger – saying that the NBTC has the power to regulate the pricing in the market.

However, NBTC’s vote today was also a vote to determine if it had the power to approve/reject mergers. By only “acknowledging” the merger, the NBTC has left itself dead on the floor with no powers and zero trustworthiness, as an “independent” regulator. Notice the wording of the resolution from the meeting is “acknowledge” rather than “approve”, showing the lack of power  the regulator has.

The handling of the merger case, has from the very beginning been a public circus of incompetence by the agency – from delays in appointing board members, to a public hearing that did not disclose reports, analysis and comments – to anonymous sources and leaked information favoring the share prices of the merging parties.

One of such leaked documents, shows 14 proposed remedy measures for the merger. The NBTC hasn’t even issued a Statement of Issues (SOI) to neither TRUE nor DTAC, to address the concerns that the merger will bring but has gone straight in to setting up a extremely weak set of remedies – of which most have already been in place for years but never enforced by the NBTC.

In addition, as the NBTC hasn’t released a Statement of Issues (SOI) to DTAC and TRUE, requesting them to come up with remedies on the concerns, as well as voting today that NBTC actually has no power – the chances of remedies mitigating the real issues and the enforcement of such, is slim.

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The meeting agreed on the following measures

1. Mitigation measures for concerns regarding Service Rates and Service Contracts
1) Price ceiling and determination of Average Service Fee

a. Average Service Fee, to be reduced 12 percent using the new Price Average method by weighting according to the number of users in each promotion (WEIGHTED AVERAGE) within 90 days after the merger)

b. Provide a choice and separate prices for each service, as an alternative.

c. Submit cost information and necessary information to an inspection agency.

d. The business merger must notify the user on the above for acknowledgment, in order to have an audit. Penalties in case of not doing so, include a fine based on the percentage of revenue or tiers  – or the revocation of license.

2) Determination of Service fees using the Average Economic Price (Average Cost Pricing)

a. Submit the information in accordance with the NBTC Notification Re: Criteria and Procedures for Preparation of the Telecommunications Ledger Report – and submit such to the Office of the NBTC every 3 months – or upon request of the NBTC, for cost structure examination of the Service Fee structure and to calculate if the average total cost of the prices (Average Cost Pricing) and the Marginal Cost (MC) are current and accurate.

b. Provide an experienced consultant expert, to verify the Cost Structure Data Service Rate or data on various rates of the telecommunication industry abroad for not less than 5 years to the NBTC. The applicant for the business merger is to be responsible for all expenses incurred from the procurement and employment of such consultants. The Consultants must not be associated with, linked to, or have conflicts of interest, directly or indirectly, with the business merger applicant. In accordance with (a) the merger applicant and consultant must verify the Cost Structure, Service Rate Structure and calculate the correct Average Cost (AC) and Marginal Cost (MC), for each service such as voice, data, SMS, etc., within 1 month from when the business integration is completed.

c. Provide experienced consultants expertise as in (b) to verify the accuracy of the information under (a) to verify the Cost Structure, Service Rate Structure and to calculate the correct and up-to-date Average Cost (AC) and Marginal Cost (MC) of each service such as voice, data, SMS etc., 4 times a year (quarterly). Consultation for a period of not less than 10 years or throughout the license period.  Expires in the event that the license is less than 10 years, which the NBTC will determine and the applicant for business merger will be responsible for the cost and all expenses incurred in the recruitment and sourcing of consultants. The consultants must not be directly or indirectly associated with, linked or having conflicting interests with the applicant of the business merger.

d. There must be a fixed and displayed mobile phone service rate separately for each service (Unbundle), such as voice service, data service, SMS service, etc., or promotion. Selling separate service (Unbundle Package) to users, the users must be informed and confirm first. The service fee is set according to the Average Cost Per Service (Average Cost Pricing) based on the actual usage price. There must not be a minimum purchase of services. However, the Average Cost Pricing will be applied to the case of excess service charges arising from the use of a separate service promotion. (Unbundle Package) and promotion of bundles as well.

e. Must provide convenient, fast, easy access, comprehensive and easy to purchase, change (increase, decrease) the use of mobile phone service according to the needs of end users. without limitation. The details of the service must be displayed. Service rates classified according to each service. or promotional service rates as well as methods and conditions for choosing to receive services expressly and current.

3) Maintaining Consumer Choice

True Move H Universal Communication (TUC) the mobile service of TRUE and Dtac TriNet (DTN) the mobile service of DTAC must maintain separate brands of services for a period of 3 years.

4) Service Contract

TUC and DTN shall maintain the terms of the contracts and agreements between the Company and the User. Including the benefits received under the contracts or agreements for the period specified in the contract. Unless there is a change in the terms of the contract that is beneficial to the user and has been agreed by the user.

5) Public relations of service for the confidence of service users.

After the business merger, TUC and DTN are required to publicize and disseminate information, in order to make users aware of the parties maintaining the quality of service and fair service fees and the parties must establish guidelines for maintaining the quality of goods and services after the business integration, including conditions for public relations for TUC Company and DTN Company to continue.

2. Mitigation measures regarding concerns on: Barriers to market entry, Lack of competitiveness and Supporting small entrepreneurs  
1) Prerequisite (Ex Ante)

a. The applicants for the business merger must prepare a plan for the establishment of mobile virtual network operator (MVNO), which must contain the following details:

(1) Establish a business unit to provide network services to MVNO service providers by separating the management system and accounting system from the main business unit arising from this business merger.

(2) Provide a network service system that is ready to support network service access for MVNO service providers immediately after business integration.

In addition, the actions under (1) and (2) must be ready for immediate operation when the business merger occurs.

b. Business merger licensees as well as companies under control must set up a separate management plan and accounting system for mobile network service and mobile phone service by submitting the said plan to the NBTC before the business merger.

2) Specific measures after business merger (Ex Post)

a. Licensees arising from the business merger and controlled subsidiaries must be done so that MVNO licensees can use and interconnect with other licensees as themselves.

b. The MVNO licensee shall be entitled to use the spectrum in all regions of the business merger with both direct and derivative rights under the same technology standards.

c. Access to network services for MVNO licensees must be guaranteed in receiving services under the quality of service (QoS) in accordance with the service standards set by the NBTC.

d. Must not refuse service to the MVNO licensee due to reasons of inadequacy of the mobile network. or in accordance with the rules and conditions prescribed by the NBTC.

e. Must be available to the MVNO licensee requesting access to the mobile phone network. Service can be started within 60 days from the date of request for service.

f. TUC and DTN shall provide telecommunication network services with capacity of at least 20 percent of its total telecommunication network mobile virtual network operators (MVNO) that has no connection with TUC and DTN upon request for such service.

g. The rate of wholesale compensation for mobile phone service for MVNO service providers shall not exceed the Average Service Fee offered per unit of each service according to the usage rights of every promotion at a rate of not less than 30 percent of the Average Selling Price per unit of the retail price for the bundle package or the Average Unit Selling Price per unit for the actual active voice, data, SMS, etc. service (retail – 30%), that the licensee – or subsidiary controlled by the entity arising from business merger provide to end users.

h. The mobile network operator must not impose a minimum limit on the purchase of services such as voice, data, SMS, etc., services on the MVNO licensee. The service charge shall be based on the actual usage.

3. Mitigation measures regarding Service quality concerns
1) TUC Company and DTN Company must maintain the quality of service as follows:

1.1) The quality of the network in the service

TUC and DTN shall not reduce the number of cell sites of both companies, in order to maintain the quality and standard of services that the users receive. QoS must not be lower than before and must strictly maintain the quality and standards of the service according to the NBTC’s Notification Re: Standards of Telecommunication Service Quality.

1.2) Quality of Customer Service

TUC and DTN must prepare to support the number of customers that will increase from the business merger in order to provide service quality to users not lower than before, such as the number of staff that are sufficient to support the service both in regards of service center and call center staff, as well as the size of the customer service center that can support the incoming and outgoing calls of service users.

2) Network Coverage TUC and DTN must provide a telecommunications network for business operation with 5G technology covering not less than 85 percent of the total population of the country within 3 years and 90% of the total population of the country within 5 years from the date of business incorporation.

4. Mitigation measures for Spectrum ownership/Infrastructure sharing concerns
1. Spectrum holdings

TUC and DTN must comply strictly with the laws relating to spectrum usage in telecommunication business.  (The use of frequency spectrum under Section 41, paragraph four, Section 44/1 and Section 44/3 of the Spectrum Assignment Organization Act B.E. 2553 and its amendments)

2. Infrastructure Sharing

TUC and DTN are required to allow other licensees to lease their own telecommunication networks to operate their telecommunication businesses. and must strictly comply with the rules relating to the use of telecommunication networks of the NBTC.

5. Mitigation measures: Thailand’s Digital Economy Innovation and Digital Divide concerns

1. Network Coverage TUC and DTN must provide a telecommunications network for business operation with 5G technology covering not less than 85 percent of the total population of the country within 3 years and 90% of the total population of the country within 5 years from the date of business incorporation.

2. Provide promotional programs at special low prices for low-income earners and underprivileged people in society and provide thoroughly public relations for the target group.

3. (Digital Divide) Propose a concrete innovation development plan within 60 days after being notified of specific conditions or measures and start implementing the plan within 1 year. 

In addition the meeting agreed to:

1. Reporting on business results under the implementation of the period and conditions received from the NBTC every 6 months for a period of at least 5 years

2. After the business merger, if the NBTC considers or receives complaints that there are acts, behaviors or causes that monopolize or reduce or limit competition in the service, or there is a material change in the telecommunications business causing the specific conditions or measures to be inappropriate or ineffective, the NBTC may suspend, cancel, add or revise specific conditions or measures as appropriate and necessary.

3. The meeting also assigned the Office of the NBTC to discuss 3 issues with the NBTC’s legal advisory sub-committee, namely; The approval of a mechanism for selling shares and power to control the business.. Policy (Divestiture) on the business merger of TUC and DTN in the future and Complaints about the qualifications of the independent consultants. (Finansa Securities)

4. Assign the Office of the NBTC to study the 2018 business merger announcement and the 2006 announcement.

5. Agree on the principle of appointing a sub-committee to monitor and evaluate all business merger and acquisitions according to the 2018 announcements.

6. The Office of the NBTC and the business merger notifier, shall announce to the service users of the specific conditions and measures as approved by the resolution. In order to have an audit and have penalties in case of not doing so, such as a fine in the form of a percentage of revenue or tiers or the revocation of license.

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NBTC's 14 remedy measures BEFORE the acknowledgement of the merger

1. Spectrum holding

Office of the NBTC 1st proposal:

  • It should be stipulated that TRUE and DTAC cannot use their spectrum together to provide services and the parties must strictly comply with the NBTC rules related to the use of frequencies.

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • The Office of the NBTC is of the opinion that it is only advisable for applicants to merge businesses to comply with the rules that are already in force.
  • Without the sharing of frequencies together the NBTC may, however, consider in the future the allocation of spectrum to new operators, through auctions and mechanisms such as set-aside spectrum or a spectrum holding ceiling.
2. Maintaining consumer choice

Office of the NBTC 1st proposal:

  • Assigning no business merger to TRUE and DTAC and maintain separate service brands for a period of time, such as 3 years.

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • No comments received
3. Support for MVNO

Office of the NBTC 1st proposal:

  • Prescribing TRUE and DTAC to sell capacity for mobile phone service to MVNO, which may be set at 20% of the capacity of their own network (more than the normal condition at 10%).

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • From the various opinions received — in addition to promoting MVNOs to enter the market by stipulating measures to sell capacity of mobile phone services to MVNOs as proposed — additional measures may be considered, including:
  • Increasing or maintaining the number of MVNOs in the market, for example requiring that before or after a business merger, a contract must be made with at least 1-2 non-affiliated MVNO operators, which could create more market players.
  • However, the pressure of such measures may cause an MVNO, that is not really ready to provide services, to enter the market anyway due to the measure ending up being unable to compete and leave the market.
  • Determining that the wholesale of mobile phone services to MVNOs must be paid according to the actual amount (Pay as you go) to reduce the burden and risk of providing services.
  • According to the opinion of the subcommittee of Consumer Protection and Civil Rights, if an MVNO can purchase a quantity of services that is in line with its ability to provide its own services, this will reduce costs and be one of the factors that help MVNOs being competitive and stay in the market.
4. Determination of Service Rates

Office of the NBTC 1st proposal:

  • It should be determined that TRUE and DTAC must strictly comply with the rules relating to the supervision of the NBTC’s service fee rates – increased from the one that is currently in use, to make the governance more suitable for the changing market structure with conditions that are suitable and flexible to the current situation.
  • It should be similar to the approach proposed by Chulalongkorn University consultants regarding pricing in the form of Price Cap, which takes into account the current market condition and the efficiency of the telecommunication industry, etc.

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • The Office of the NBTC has reviewed that the most appropriate approach is that TRUE and DTAC must strictly comply with the rules relating to the supervision of the NBTC’s service fee rates. At present, the supervision of service fees is in accordance with the NBTC’s Notification on Determination and Supervision of the Domestic Mobile Phone Service Rate Structure and the NBTC’s Announcement on Determination and Supervision of Rates of Mobile Phone Service Charges.
  • Domestic mobile phone service in excess of the usage of the main promotion – and to consider additional measures related to the service rate – must increase from the one that is currently in use to make the governance more appropriate for the changing market structure from mergers and acquisitions.
5. Quality of Service (QoS)

Office of the NBTC 1st proposal:

  • Signal (QoS): TRUE and DTAC must not reduce the number of cell sites from the original, in order to maintain the quality and standard of services that the people receive, not lower than before.
  • TRUE and DTAC must strictly maintain QoS in accordance with the NBTC’s announcement regarding the standard of telecommunication service quality.
  • QoS in customer service: Determine that the two companies are ready to support the number of customers that will increase from the business combination in order to ensure the quality of service to the service users is not lower than before, such as the number of staff that are sufficient to support the service in both the service center and call center staff, as well as the size of the customer service center area that can support the calls of service users.

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • The proposed measure by the Office of the NBTC is in the same direction as the specific measures proposed by other agencies.
6. Service Contract

Office of the NBTC 1st proposal:

  • It is appropriate to specify that TRUE and DTAC terms of the contract and the agreement between the Company and the user shall be maintained, including the benefits received under the contract or agreement for the period specified in the contract. Unless it is a change in the terms of the contract that is beneficial to the user and with the consent of the user.

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • It is of the view that the Office of the NBTC has set a contract to protect consumers. But there may be additional consideration as to the appropriate length of time the business merger should maintain the contract and how to notify the user of the termination of the contract and the change of the contract in order for users to get the most benefit. Both Finansa Securities and the Subcommittee on Consumer Protection and Civil Rights have proposed a period of approximately 3 years, which is a period that may be considered applicable.
7. Network Coverage

Office of the NBTC 1st proposal:

  • Set additional measures to telecommunication network coverage requirements with 5G technology, for example to achieve 5G network coverage of more than 80% of the population within 5 years.

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • It is the opinion, that measures should be imposed on the requirements for expanding the coverage of telecommunication networks with 5G technology, not less than the proposal of the business merger which is consistent with the opinion of the subcommittee on Consumer Protection and Civil Rights and the Independent Consultant (85% within 3 years)
8. Infrastructure sharing

Office of the NBTC 1st proposal:

  • Should stipulate that TRUE and DTAC must allow other licensees to lease their own telecommunication networks. and must strictly comply with the rules relating to the use of telecommunication networks of the NBTC

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • The measures proposed by the Office of the NBTC are in the same direction as the opinions received.
9. Public relations of service for the confidence of users after business combination

Office of the NBTC 1st proposal:

  • Public relations and publicity to maintain quality service and fair prices for service users

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • The NBTC’s proposals for measures are consistent with the opinions received. However, in the details, the Office of the NBTC has not yet determined the details of procedures, time frames, and public relations methods. While the subcommittee on Consumer Protection and Civil Rights are clearly defined and concrete.
  • Therefore, it may be considered further in the implementation to make public relations to be more clear, according to the measures of the Office of the NBTC
10. Follow-up on operations and changes that may occur after a merger

Office of the NBTC 1st proposal:

  • Reporting on business results subject to the implementation of the periods and conditions received from the NBTC on a quarterly basis – or in accordance with the period prescribed by the NBTC, in accordance with the form prescribed by the NBTC, for at least a period of time: 3 years

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • The Office of the NBTC’s measure proposal has not specified the details of what information the applicant must report to the NBTC, while Chulalongkorn University has proposed details of what should be done and reported, It also proposed to have measures to monitor the results of the operation by having other agencies to join in the inspection. Therefore, it may be considered for further adaptation in conjunction with the licensee to report the results of the existing operations.
11. Promotion of competition – increase MNO service providers

Office of the NBTC 1st proposal:

  • Specify the return of spectrum from the same operators who requested a business merger and arrange spectrum auctions to be allocated specifically to new MNO operators
  • Require distribution of property holdings such as spectrum, telecommunication towers or necessary infrastructure and details of the distribution of property holdings, should be completed prior to the business combination, to prepare spectrum allocation plans for new service providers and conducting spectrum auctions at the latest within 6 months after the business merger
  • Require new MNO operators to enter into roaming contracts with existing applicants or service providers until they have sufficient infrastructure of their own.

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • Both Chulalongkorn University and the Sub-Committee on Consumer Protection and Civil Rights propose a way to create a new service provider that has a network using the spectrum that has been returned from the business merger, as well as selling some networks to new service providers and the introduction of the network, in the form of roaming.
  • These methods emphasize on new venture operators having access to the infrastructure needed to provide services – both from the allocation of resources and the use of the necessary infrastructure of the same operators in the market until they can provide services on their own – may need to be considered in conjunction with the measures of spectrum holding and determined accordingly.
12. Prevention of business takeover to reduce the likelihood that either TRUE Corp or DTAC can control the NewCo solely

Office of the NBTC 1st proposal:

  • Conditions relating to the Board of NewCo may prescribe a condition for shareholders of TRUE Corp and DTAC to either be unable to nominate – no more than half of the names of directors in NewCo during the first 3 years after the merger.
  • Conditions relating to the appointment of executives and the Board of Directors of NewCo’s subsidiaries
  • The appointment of NewCo’s directors must be approved by NewCo’s Nomination and Remuneration Committee. NewCo’s sub-committees must be appointed in accordance with NewCo’s board designation characteristics.

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • Finansa Securities offered measures related to the prevention of new company domination by any one company, by offering measures to the NBTC to determine the shareholding and appointment of executives and sub-committees of the new company in a way, such an approach could be a defense against a company domination by a particular company.
  • But there are concerns whether it will interfere with the business management of the business merger or not. Therefore, the proposed measures and objectives for their appropriate implementation should be considered.
13. Investment to develop new services and develop new technology

Office of the NBTC 1st proposal:

  • NBTC should determine the investment ratio of entrepreneurs in technology development and innovation according to revenues.
  • Require the development of technology and infrastructure to benefit consumers and increase pressure on other operators to develop tech and infrastructure. It is more difficult to enter the market as new entrees must find comparable technology
  • NBTC should play a key role with relevant sectors in overseeing and formulating policies on digital technology development to support the expansion of the digital economy. Due to advances in technology this group is largely associated with telecommunication technology.
  • The NBTC should determine its own investment plan in technology development and innovation by considering the worthiness of investment and sharing of resources with the private sector to support government operations

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • These measures should be those that promote the overall growth and development of technology for the further development of the industry, rather than the specifics of individual entrepreneurs
14. Receiving issues and problem solving mechanisms for service users

Office of the NBTC 1st proposal:

  • Require the applicant for the business merger to establish a mechanism for accepting matters and solving problems for service users after the business merger;
  • Requiring all service providers to provide channels for receiving complaints and disseminating statistics and complaints problems in accordance with the rules prescribed by the NBTC.

Office of the NBTC proposal after processing the opinions received from the sub-committees:

  • At present, the NBTC has announced the process for receiving and considering complaints related to the telecommunication business act B.E. 2559, which specifies processes such as the complaint submission process.
  • The process of considering and reviewing the resolution of complaints and the duty of the licensee to manage complaints including receiving and solving complaints, applies to all licensees. Therefore, if there are any additional details In terms of such matters it would be more appropriate to apply as a whole.
Author: Allan Rasmussen
Managing director at Yozzo. Allan’s expertise includes the development and execution of growth strategies, market insights, trends and opportunities, new business models and strategies
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