Thailand: The Forthcoming Liberalization Of The Thai Telecommunications Market

Last Updated: 5 June 2001
Article by Pascale Prud'Homme

The liberalization of the Thai telecommunications market, pursuant to Thailand’s commitments under the World Trade Organization ("WTO"), is scheduled for completion by Year 2006. The transition from a government monopoly to a liberalized market requires Thailand to undergo a complete revision of its telecommunications regulatory framework.

A. Present Regulatory Framework

The telecommunications market in Thailand is a government monopoly operated by two state enterprises: the Telephone Organization of Thailand ("TOT"), which is responsible for the domestic market and neighboring countries, and The Communications Authority of Thailand ("CAT"), which is responsible for all international services, including telephone, internet and postal services. In practice, however, there is an overlap of responsibilities, resulting in competition between the two state enterprises in certain sectors of telecommunications (such as mobile telephones, data communication and paging services).

The two state enterprises fall under the direct control of the Ministry of Transport and Communications ("MOTC"), which oversees frequency management and allocation through its Post and Telegraph Department ("PTD"). The ministry is also responsible for satellites, and acts as Thailand’s representative in international forums relating to postal and telecommunications services.

The PTD operates under three acts: the Postal Services Act B.E. 2477 (1934), the Telegraph and Telephone Act B.E. 2477 (1934), and the Radio Communication Act B.E. 2498 (1955). The PTD had been the sole body responsible for communication services, but with the incorporation of the TOT in 1954 and the CAT in 1977, PTD’s role was significantly reduced. The two state enterprises have now assumed the PTD’s role of oversight and regulation of domestic telephone, international telephone and other services.

The Telephone Organization of Thailand Act B.E. 2497 (1954) established the TOT in 1954 as a state enterprise under the MOTC. The act also transferred all telephone operations from the PTD to TOT.

The Communications Authority of Thailand Act B.E. 2519 (1976) established the CAT in 1977 as a state enterprise under the MOTC. The CAT was created to oversee and regulate postal and international telephone services.

B. Private Sector Involvement

Presently, besides the PTD, telecommunications services are provided exclusively through the CAT and TOT. However, since the late 1980s, private companies have been permitted to operate within the Thai telecom market by entering into joint ventures with the relevant state enterprises, or by obtaining expensive concessions from one of the state enterprises in the form of Build-Transfer-Operate Contracts ("BTO") as opposed to the normal "Build-Operate-Transfer Contracts". Presently, private firms build and operate concession networks over a specified period of time and share their revenue with the TOT, CAT or PTD. Ownership in such networks are transferred to the state enterprises immediately after completion of construction and installation, as Thai law does not allow private ownership of telecommunications infrastructure.

The TOT, CAT and PTD gave BTO concessions to a number of large local companies, many of them forming joint ventures with foreign telecom companies. Licenses have also been issued to private companies for telecommunications services.

C. Master Plan For Telecommunications Development

To conform with WTO requirements, which stipulate that the Thai Telecom market must be fully liberalized by the year 2006, the Thai government on November 4, 1997 approved a "Master Plan for Telecommunications Development".

The Master Plan provides for the privatization of the TOT and CAT; the conversion of existing concessions into licenses; the opening up of the telecom market to competition through a step-by-step liberalization process; and the establishment of an independent and impartial regulatory body, the National Telecommunications Commission ("NTC"), along the principles set forth by the WTO.

With the implementation of the Master Plan, the Thai telecom market will be developed from a government monopoly into a regulated, liberalized market with a number of operators licensed by the NTC regulator. The NTC will establish rules and regulations on competitive practices concerning such matters as qualifications, licenses, operating conditions, fees, tariff structures, and consumer rights.

D. Master Plan Implementation

Pursuant to the Master Plan, the Thai telecom market was to be opened to local competition by October 1, 1999, following privatization of the TOT and CAT, and conversion of all concession agreements into licenses.

Due in part to the local economic downturn and workers’ resistance to privatization, the implementation of the Master Plan was delayed. However, it is hoped that the sector will be privatized and liberalized on time with the recent adoption of the Trade Competition Act (1999), which can be used to prevent formation of monopolies and reduce unfair practices, and the State-Enterprise Corporatization Act (1999), which empowers the government to transform state enterprises into limited companies.

The Cabinet approval of a conversion framework (proposed by the Thailand Development Research Institute) for concessions was another crucial step towards the liberalization of the sector. The proposed framework allows companies to convert their concessions into licenses by compensating the state enterprises. An ad hoc committee was established with the responsibility to overview and establish the conditions for conversion. The framework has been criticized by some companies that claim it would reduce their competitiveness in the liberalized market. Companies had until May 31, 2000 to submit their demand for conversion.

The Organization of Frequency Wave Allocation and Supervision of Radio Broadcasting, Television and Telecommunications Enterprises Act has been passed by the Parliament and became effective March 2000. The Act provides for the creation of the NTC, which is to be inaugurated by this October, and a new National Broadcasting Commission ("NBC"). In addition to the NTC’s role as a regulatory body (see previous explanation), the two commissions will be responsible for frequency allocation, cross-media ownership, content and ethics.

Recently, the MOTC issued guidelines for Internet deregulation. At present, Internet Services Providers ("ISPs") must obtain licenses from the CAT, which in turn is given a 35 percent interest in providers’ shares (including a 3 percent interest for its employees). The proposed liberalization of Internet services, if accepted, would help promote the development of Internet services in Thailand, and would represent a major achievement toward liberalization.

According to the Master Plan, the TOT and CAT shall be privatized as follows:

  • The MOTC will set up a holding company for the TOT and CAT.
  • The TOT and CAT will be transformed into TOT Company Ltd., CAT Telecommunication Company Ltd., and CAT Postal Company Ltd. A holding company (state enterprise) will hold their shares.

  • TOT Co., Ltd. and CAT Telecommunication Co., Ltd. will continue their operations as presently conducted.
  • TOT Co., Ltd. and CAT Telecommunication Co., Ltd. will allow interested strategic partners to hold a maximum of 25 percent of each company, private investors to hold a maximum of 22 percent (not more than 5 percent per investor) and employees at least 3 percent.
  • The TOT and CAT companies will then become public companies, with the state continuing to hold a minimum of 30 percent of the shares. Prior to the end of 2006, foreign strategic partner(s) and private investors together will only be permitted to directly or indirectly hold a certain percentage of the shares (around 20 to 25 percent).
  • CAT Postal Co., Ltd.’s equity will be held by the state until it is ready to be privatized (this date has not yet been determined).

In order to achieve the objectives, privatize CAT and TOT and liberalize the sector on time, the government must adopt and/or make the following changes to existing laws:

  1. Pass a Telecommunications Act to repeal the existing Telegraph and Telephone Act B.E. 2477 (1934), and to abolish the PTD’s monopoly right in the market (these rights were later transferred to the TOT and CAT) and pass a Radiocommunications Act and a Broacasting Act. The Telecommunciations Act should allow private operators to apply for telecom licenses. The Act should also provide guidelines and control the powers given to the NTC and NBC and as such has to come into effect before the end of this year – deadline for the creation of the NTC. A controversial Bill was recently approved by the Cabinet in principle, and should be submitted to the Parliament in the near future. The Radiocommunications Act and the Broadcasting Act are under consideration by the Council of State;
  2. Repeal the Telephone Organization of Thailand Act B.E. 2497 (1954);
  3. Repeal the Communication Authority of Thailand Act B.E. 2519 (1976);
  4. Revise the Postal Services Act B.E. 2477 (1934) in order to establish a new state enterprise to operate postal services; and
  5. Repeal the Radio Communication Act B.E. 2498 (1955).

In liberalizing the telecommunications industry, Thailand will permit domestic and foreign private businesses to apply for licenses to operate telecommunications services. However, foreign private companies may do so only by entering into joint ventures with Thai companies. It is hoped that foreign companies will be entitled to apply for licenses without the need to enter into joint ventures with Thai companies by 2006, when full liberalization of the telecommunications market should commence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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