TOT’s 3G project raises a number of questions that people of conscience should consider. How much does a nationwide 3G network cost? 16 billion? 20 billion? 29 billion? How should it be financed? It also raises the question of privatisation, the separation of state domain assets and also a matter of sufficiency - when is enough, enough?
TOT got its 3G spectrum through its acquisition of Thai Mobile, a new state enterprise set up in the Chuan era with an eye to do 3G. It was originally owned 50:50 with CAT before TOT bought it out. As a stopgap measure it ran a GSM 1900 network (the top part of GSM 1900 and the bottom part of 2100 GHz 3G overlapping if one looks at the actual frequencies involved), Thai Mobile, that never got anywhere.
Things got interesting when towards the middle of the Thaksin era, then ICT Ministry Permanent Secretary and chairman of the three boards - CAT, TOT and ThaiMobile, was removed. The media focused only on her removal as head of CAT and TOT but Khunying Dhipavadee herself said quietly, after the fact, that the main reason was the other board she was chairing.
The cost of the network started around 17 billion back when it was first discussed. Then, with each change of government, the cost nudged up and up and up, peaking at 29 billion during the Ranongrak era.
In the words of one former acting CEO of TOT I had a conversation with in Islamabad, he said that the specifications had not changed much over the years but the price kept going up.
So, did the Juti team do a good job in bringing the price down from 29 back down to 17? Well, yes and no. Yes, they probably saved upwards of ten billion compared to if the project had gone through earlier, but at the same time the cost of technology has gotten a lot cheaper as it has been delayed so much so the savings as a percentage are questionable.
But it was the way the project is going ahead that has raised eyebrows. It has been rushed through with giants such as Ericsson and ZTE being thrown out, one for not including a brochure on antennas, the other for offering too much capacity. Since when does offering too much prior to a bid result in disqualification?
Long before the auction even took place, whispers in the corridors of power said that it was a done deal with sponsorship of a football team being the sweetener for the deal, badly needed sponsorship in the run-up to the elections.
On another level, the question is why is the government doing - at great cost - something that the private sector is not just willing to invest in, but pay handsomely to be able to do so? What is the role of corporatised TOT? It is still a tax-collector (and user), a de-facto regulator, hoarder of spectrum and not a particularly effective operator.
When is enough enough? Everyone says that TOT and CAT will fail without government support. But is the answer giving them even more resources to sub-contract out and plunder? Or should something be done at a more fundamental level to get them working efficiently?
Long ago, telephone lines (well, telegraphs) were provided directly from the Post and Telegraph Department (PTD - which became the regulator under MICT and transformed into the National Telecommunications Commission and again, more recently, the National Broadcasting and Telecommunications Commission). The PTD could not cope with the red tape and sub-contracted the rights to CAT and TOT. But after a while, the two again could not cope with its own red tape to sub-sub contract it to AIS, Dtac and True.
Rewind back to the TOT project that is happening today. If TOT is technically incapable of developing its own 3G network as one year of operations has proved (for instance, quality of service was never implemented on the network; billing was a joke and 9 months into its 12 month contract, one MVNO had to install a new billing system) and have to sub-let to Samart and co, what value does TOT add to the value chain? To the country as a whole? Nothing. It is a rent collector and not a particularly efficient one at that.
On a side note, the AIS-TOT case is also interesting. TOT wants 74 billion from AIS as a result of the change in contract due to the revenue share changes and excise tax. While Dtac might have a larger headline number, as of mid last year at least, most there were quite confident with the situation. The reason is quite simple.
When a private entity signs a deal with a government agency in good faith, it is not up to the them (the telco) to check if their concession holder (CAT) has dotted the I’s and crossed the T’s properly and is authorised to sign on behalf of the government, well, not unless they influenced the policy making.
During the Thaksin era, the concessions were changed. Yes, Dtac and True benefited from the changes, as did AIS. The changes in excise tax in particular were aimed at the industry as a whole, but obviously the market leader would have benefited the most. The noose that is now loosely around AIS’ neck was the fact that it was owned by the wife, son, cook and driver of the Prime Minister at that time who was responsible for the changes. Unlike the others, they cannot say they only followed the concession holder’s whims as they were both concessionaire and policy maker at the same time.
One wonders if Temasek bothered with due diligence before paying 73 billion for the company. Or perhaps their diligence was of a different kind.
Also on Amitiae http://www.amitiae.com/?p=576
TOT got its 3G spectrum through its acquisition of Thai Mobile, a new state enterprise set up in the Chuan era with an eye to do 3G. It was originally owned 50:50 with CAT before TOT bought it out. As a stopgap measure it ran a GSM 1900 network (the top part of GSM 1900 and the bottom part of 2100 GHz 3G overlapping if one looks at the actual frequencies involved), Thai Mobile, that never got anywhere.
Things got interesting when towards the middle of the Thaksin era, then ICT Ministry Permanent Secretary and chairman of the three boards - CAT, TOT and ThaiMobile, was removed. The media focused only on her removal as head of CAT and TOT but Khunying Dhipavadee herself said quietly, after the fact, that the main reason was the other board she was chairing.
The cost of the network started around 17 billion back when it was first discussed. Then, with each change of government, the cost nudged up and up and up, peaking at 29 billion during the Ranongrak era.
In the words of one former acting CEO of TOT I had a conversation with in Islamabad, he said that the specifications had not changed much over the years but the price kept going up.
So, did the Juti team do a good job in bringing the price down from 29 back down to 17? Well, yes and no. Yes, they probably saved upwards of ten billion compared to if the project had gone through earlier, but at the same time the cost of technology has gotten a lot cheaper as it has been delayed so much so the savings as a percentage are questionable.
But it was the way the project is going ahead that has raised eyebrows. It has been rushed through with giants such as Ericsson and ZTE being thrown out, one for not including a brochure on antennas, the other for offering too much capacity. Since when does offering too much prior to a bid result in disqualification?
Long before the auction even took place, whispers in the corridors of power said that it was a done deal with sponsorship of a football team being the sweetener for the deal, badly needed sponsorship in the run-up to the elections.
On another level, the question is why is the government doing - at great cost - something that the private sector is not just willing to invest in, but pay handsomely to be able to do so? What is the role of corporatised TOT? It is still a tax-collector (and user), a de-facto regulator, hoarder of spectrum and not a particularly effective operator.
When is enough enough? Everyone says that TOT and CAT will fail without government support. But is the answer giving them even more resources to sub-contract out and plunder? Or should something be done at a more fundamental level to get them working efficiently?
Long ago, telephone lines (well, telegraphs) were provided directly from the Post and Telegraph Department (PTD - which became the regulator under MICT and transformed into the National Telecommunications Commission and again, more recently, the National Broadcasting and Telecommunications Commission). The PTD could not cope with the red tape and sub-contracted the rights to CAT and TOT. But after a while, the two again could not cope with its own red tape to sub-sub contract it to AIS, Dtac and True.
Rewind back to the TOT project that is happening today. If TOT is technically incapable of developing its own 3G network as one year of operations has proved (for instance, quality of service was never implemented on the network; billing was a joke and 9 months into its 12 month contract, one MVNO had to install a new billing system) and have to sub-let to Samart and co, what value does TOT add to the value chain? To the country as a whole? Nothing. It is a rent collector and not a particularly efficient one at that.
On a side note, the AIS-TOT case is also interesting. TOT wants 74 billion from AIS as a result of the change in contract due to the revenue share changes and excise tax. While Dtac might have a larger headline number, as of mid last year at least, most there were quite confident with the situation. The reason is quite simple.
When a private entity signs a deal with a government agency in good faith, it is not up to the them (the telco) to check if their concession holder (CAT) has dotted the I’s and crossed the T’s properly and is authorised to sign on behalf of the government, well, not unless they influenced the policy making.
During the Thaksin era, the concessions were changed. Yes, Dtac and True benefited from the changes, as did AIS. The changes in excise tax in particular were aimed at the industry as a whole, but obviously the market leader would have benefited the most. The noose that is now loosely around AIS’ neck was the fact that it was owned by the wife, son, cook and driver of the Prime Minister at that time who was responsible for the changes. Unlike the others, they cannot say they only followed the concession holder’s whims as they were both concessionaire and policy maker at the same time.
One wonders if Temasek bothered with due diligence before paying 73 billion for the company. Or perhaps their diligence was of a different kind.
Also on Amitiae http://www.amitiae.com/?p=576
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