After months of prevarication, Thailand’s telecom regulator gave the green light in October for the merger of two major operators — True Corporation (True) and Total Access Communication (Dtac).

The National Broadcasting and Telecommunications Commission (NBTC) voted 3:2 to allow the merger of the country’s second- and third-largest mobile operators, citing its lack of authority to approve or reject the proposed merger plan.

The closely-scrutinized decision has only fuelled a hot debate on whether the majority of commissioners had failed to do their duty properly.

NBTC’s dissidents

The two NBTC commissioners who voted against the deal have raised several reasons to oppose the merger.

Pirongrong Ramasoota was one of the commissioners who voted against the merger. Before the deal, True Move H Universal Communications (TUC) had a 31.99 percent share of the mobile phone market and Dtac Trinet (DTN) had 17.41 percent. The merger would effectively give them a market share of 49.40 percent, resulting in the new entity — along with market leader AIS — creating a duopoly, she said.

She cited the study of SCF Associates Ltd, an independent consulting firm, which has predicted that the merger would likely result in disadvantages for consumers and a likely rise in mobile phone service charges, potentially affecting the whole Thai economy.

She argued that there was no concrete evidence the merger would yield more benefits to society. There is a high chance that the merger would lead to monopoly and stifle competition, which would go against the Constitution.

The merger is likely to have a long-term impact, as it would be almost impossible to reverse course, she warned. It also would make it very difficult for new entrants in the future when the market becomes mature, she said.

She referred to studies on telecom mergers in Mexico and the Philippines, which revealed that after a merger leaves only one or two operators in the market, it would be difficult to revive the competitive conditions that existed in the market before the merger.

Suphat Suphachalasai, the other commissioner, who voted against the deal, shared similar concerns. He pointed to the study, which suggested that a merger would lead to a high degree of concentration in both infrastructure and services of mobile phone and internet broadband, and these could potentially create barriers to new companies, rise in service charges and low-quality of services for users.

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Regulator sets conditions 

The NBTC has set many conditions for True and Dtac in order to allay fears of an impact on consumer interest and fair competition in the telecom market.

One condition requires operators to lower service prices by 12 percent within 90 days of merger. They are required to send details of the cost of running the business to the NBTC. The merged entity must maintain True and Dtac as separate brands for the first three years.

But those who oppose the merger argue that such conditions would not help much in protecting consumer interest.

Somkiat Tangkitvanich, president of Thailand Development Research Institute, described the decision of the NBTC commissioners who backed the merger or abstained in the vote “a shame”.

He expressed doubts on whether the merger conditions set by the NBTC would be effective.

The condition set by the watchdog, asking the mobile operators to lower the service charge by 12 percent in 90 days of the merger, was too small, he said.

The condition requiring the merger parties to maintain separate brands for three years would not yield any benefit to consumers and other businesses, said Somkiat.

The NBTC’s demand for the two parties to submit their cost structure shows that the watchdog has allowed the merger without even having knowledge of the cost structure of the private operators. Somkiat slammed the NBTC for not carrying out its duties properly.

Legal battle  

Parinya Tewanarumitkul, a law lecturer at Thammasat University, accused the telecom watchdog of dereliction of duty, as it had tried to shirk its responsibility. The vote to acknowledge the merger suggested that the NBTC does not assume the authority to decide, leaving the matter passively to private companies. Such an action goes against the Constitution and its own regulations, he said.

In November, the Thailand Consumers Council filed a lawsuit in the Central Administrative Court, seeking revocation of the NBTC’s decision and for the court to issue an injunction to suspend the merger.

The consumer group accused the regulator of failing to do its duty properly, and warned the merger would result in severe damage to consumer interest.

In December, the court rejected their plea for an injunction, while the legal case is pending.

By Thai PBS World’s Business Desk