NEED 4 SPEED

Thailand 2017 | IT & E-COMMERCE | FOCUS: ENTER 4G

On December 15, 2015, Thailand's telecom giants began a bidding process for licenses to launch the much-anticipated 900MHz fourth generational wireless service (4G).

With their eyes firmly on the prize, the heads of Advanced Info Service (AIS), True Move, Total Access Communication (DTAC), and newcomer Jasmine International (Jas) entered the auction knowing that a successful bid could give them a unique appeal to Thailand's 87 million mobile subscribers. After four grueling days and 199 rounds of bidding, the winners were announced—to the shock of industry experts. True Move and Jas had secured the 900MHz spectrum with bids of around $2.1 billion each, adding an additional $4.2 billion to state revenues, which totaled $6.45 billion from mobile spectrum bids in 2015. True Move, a unit of True Corporation, which is 18% owned by China Mobile and managed by the Charoen Pokphand Group, had been lagging in third place in Thailand's telecom three-horse race, with just over 20 million subscribers. Moreover, with these figures dwindling throughout much of 2015, it was generally expected that True would take the bidding process to the wire, in order to fight its way back into the market share. In contrast, however, Jas' announcement as a 4G winner raised many questions, such as whether the telecoms market could accommodate a fourth contender, and more directly whether Jas would be able to turn a profit given the high price paid for the bandwidth. Established in 1982 as an engineering consultancy firm, Jas currently has no mobile phone users and so the industry is left to speculate how and when it will make its move. One report that began surfacing in late December was that Jas is in talks with Korean SK Telecom and Japan's SoftBank over a potential strategic partnership.

In fact, prior to the auction it was widely expected that market leaders AIS and DTAC would make use of their stronger balance sheets to outbid their rivals and maintain their dominant position in Thailand's telecom sector. Founded by controversial former Prime Minister Thaksin Shinawatra in 1986, AIS has grown to acquire the lion's share of the market, with over 45 million subscribers—most of which enjoy 3G service. DTAC, Thailand's second largest mobile operator with 28.4 million users, partly owned by Norwegian telecom giants Telenor, was similarly widely tipped to introduce the 4G service, particularly after it failed to launch the 4G license on the 1,800MHz spectrum in a similar auction in November 2015. Both companies have said that failing to win the bid will allow them to improve services on their existing networks and save money for future 4G and 3G rollouts. Moreover, both firms have insisted that the winning bids were grossly overpriced, as they were nearly six times higher than the actual value of the spectrum.

Overpriced or not, True Move and Jas have inherited a unique opportunity to exert their position in a mobile market, which is surging and showing no signs of slowdown. According to a study conducted by Ericsson, 4G mobile broadband subscribers in Thailand are expected to double throughout 2016. Moreover by 2018, 40% of total mobile subscribers are expected to be on the service, ranking Thailand as the third-largest 4G market in the Southeast Asian and Oceania region, behind Australia (70%) and Singapore (80%). The major factor behind these forecasts is that mobile operators are expected to concentrate their efforts in tapping up the market share in rural parts of the country, which still have 20 million 2G users, or 28.6% of the population.

A recent study found that Thai's spend an average of 160 minutes on their smartphone per day; the second highest in ASEAN. With new services being launched, a debutant fourth operator joining the market and deeper penetration expected in rural areas, they may find themselves glued to their handsets like never before.