By Francesca Regalado, Nikkei staff writer
Thailand’s telecom regulator declined on Thursday to halt a merger that will create the country’s largest network operator, in effect turning the local market into a duopoly despite opposition from industry experts, competitors, consumer groups and politicians.
Through cross-share purchases, the merger will combine True Corp.’s 32 million subscribers with the 19 million of Total Access Communications (DTAC), the Thai arm of Norwegian operator Telenor, under a new company that will command around 54 per cent of the local mobile communications market.
The company to be named NewCo will leapfrog current market leader Advanced Info Service, which has 44 million subscribers.
The market capitalization of True Corp. was at 170 billion baht (US$4.4 billion) as of Thursday, while DTAC was valued at 108 billion baht, according to Refinitiv. The merger will create a US$7.3 billion company.
The National Broadcasting and Telecommunications Commission board voted 3-2 on Thursday in favor of the merger at the end of a special meeting that lasted 11 hours. It placed conditions on the merger such as price ceilings and a requirement to reserve spectrum for mobile virtual network operators, or MVNOs.
The regulator’s decision was largely expected given the heightened economic concentration of the telecoms market under Thai family conglomerates. The Charoen Pokphand Group, which controls True Corp., is owned by the Chearavanont family, Thailand’s richest clan. With the merger, Thailand’s telecoms industry will effectively become a duopoly with implications for both consumers and national security.
Consumer groups and industry experts resisted the merger. A petition on Change.org gained more than 21,000 signatures and was backed by politicians from the opposition Move Forward Party. The Thailand Consumer Council said it would raise the industry’s market concentration by 35 per cent, as measured on the Herfindahl-Herschman index. Mobile tariffs for customers would increase by 240 per cent, the council said.
True and DTAC have said their aim is not to raise prices but to invest jointly in the country’s digital transformation, combining spectrum for 5G networks and capital for local technology startups. Thailand ranks fourth in the world in broadband internet speeds and 53rd for mobile with nearly nationwide 5G coverage, according to Speedtest. Median 5G speeds for AIS outpace both True and DTAC.
Shareholders of True and DTAC approved the merger plan in April, months before receiving regulatory approval. According to public filings, the companies plan to list NewCo on the Stock Exchange of Thailand in November.
True and DTAC also declined to send representatives to an NBTC fact-finding hearing in May. Appearing together in July, the companies’ chief executives threatened legal action against NBTC for damaging shareholder interests by delaying the merger.
The telecoms regulator was also challenged on whether it had legal authority to allow the merger, or whether the companies only needed to notify the NBTC of their plans. The board on Thursday decided on the latter.
“It’s like they’re saying they’re merely a registrar instead of a regulator,” said a former member of the NBTC board, Supinya Klangnarong. “It’s stated in the act that established the NBTC that their role is to prevent monopoly and that they must consider the impact on consumers.”
In a bid to halt the merger, the Thailand Consumer Council plans to file a complaint with the Administrative Court. A previous complaint was declined by the Thailand Competition Commission, which said it had no authority in telecoms. The same regulator approved CP Group’s US$10.6-billion acquisition of British supermarket group Tesco’s operations in Southeast Asia in 2020.
The deal grew CP’s share of the food retail market to over 70 per cent, derived from its Lotus supermarkets, 7-Eleven convenience stores and warehouse club Siam Makro.Last year, its listed core business Charoen Pokphand Foods logged 512.7 billion baht (US$16 billion) in revenue. The Chearavanont family has an estimated net worth of US$26.5 billion, according to Forbes.
The merger follows similar moves by Telenor in Southeast Asia. In Malaysia, Telenor is in talks to merge its Digi brand with local operator Celcom Axiata Berhad. The Norwegian operator also sold its Myanmar business for US$99.5 million to a Lebanese company, bowing to pressure from investors to exit the junta-led country.
Under the terms approved by shareholders, Charoen Pokphand Group would hold 28.98 per cent of the combined group after the merger. Telenor, DTAC’s largest shareholder, would hold 19.64 per cent. China Mobile, which owns just under one-fifth of True, would hold 10.43 per cent of NewCo.
“Telenor is not going to leave Thailand,” its chief executive Sigve Brekke said in a July press conference with CP Group CEO Supachai Chearavanont. Telenor has been in the country since 2000, but struggled to grow as it did not obtain enough spectrum, citing high license prices in Thailand. Spectrum licenses are allocated by the NBTC, which gets its operating budget from the auctions.
“If one player is too strong and there are two weak players, that’s not real competition,” Brekke said.
A fourth player, the state-owned National Telecom, commands less than 5 per cent of the market.
“If the merger goes through, maybe the law should be reformed to open the market to foreign players,” said secretary-general of the Thailand Consumers Council, Saree Aongsomwang. https://asia.nikkei.com
