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Users face mega-hit in mega-merger

BANGKOK: Mobile users may face higher charges based on combined additional expenses of B1.7-13.6 billion per month, depending on the degree of market dominance once the merger of True Corporation and Total Access Communication (DTAC) takes place, according to the Thailand Consumers Council.

technologyeconomics
By Bangkok Post

Friday 27 May 2022, 09:42AM


A group representing the Thailand Consumers Council express opposition to the merger deal at the office of the NBTC on Thursday (May 26). Photo: Komsan Tortermvasana / Bangkok Post

A group representing the Thailand Consumers Council express opposition to the merger deal at the office of the NBTC on Thursday (May 26). Photo: Komsan Tortermvasana / Bangkok Post

The council voiced its concern at a public hearing on the merger deal, organised by the National Broadcasting and Telecommunications Commission (NBTC) yesterday (May 26), reports the Bangkok Post.

The majority of the hearing’s participants called on the telecom regulator to prohibit the planned merger, saying the deal would push up the industry’s market concentration to a dangerous level.

Service charge hike

Saree Ongsomwang, secretary-general of the council, said the NBTC must oppose the deal because the merger would reduce mobile service choices for customers and reduce market competition through either collusion or market dominance.

She said the council opposes the deal based on two points. The first is the deal could be in violation of four pieces of legislation: the NBTC Act, the constitution, a consumer protection law and the Trade Competition Act.

The second point is the deal is highly likely to heap additional expense on users, Ms Saree said. The mobile industry’s average revenue per user stands at B220 at present, and the deal could push it up by least 10%.

“Mobile users may have to pay an additional amount for mobile services of B1.7bn to B13.6bn, depending on the level of monopoly following the deal,” she said.

This figure is based on 80 million active mobile subscribers in the market, said Ms Saree.

The NBTC should seriously promote telecom infrastructure sharing among operators to strengthen market competition and support the emergence of mobile virtual network operators, which provide mobile services by renting frequency networks from others, she said.

Speaking at the hearing, Chatra Kamsaeng, director of 101 PUB, a public policy think tank, said its research model suggests the merger could increase the mobile service cost by an estimated B15-50 per mobile number per month, a surge of 7-23% from the average of B220 per number per month at present.

He addressed three scenarios regarding the competition conditions that could affect mobile service prices following the merger.

In the first scenario, in which intense competition takes place after the merger, mobile service cost could rise by 7-10% to B235-242 per number per month.

If competition was at a normal level after the merger, the service cost could increase by 13-23% to B249-270.

In the final scenario, in which market collusion takes place, the service cost could surge by 66-120% to B365-480, said Mr Chatra.

Devas Lounge

High market concentration

Somkiat Tangkitvanich, president of Thailand Development Research Institute, said the merged company could see its market share reach 52%, higher than that of current market leader Advanced Info Service (AIS), while fostering market dominance.

Yet with only two major players in the market, the decline in competition would benefit AIS, said Mr Somkiat.

He recommended the NBTC block the deal.

If any major operators want to exit the market, the NBTC can force them to sell their business to non-mobile players, Mr Somkiat said.

The NBTC should help reduce telecom infrastructure costs by promoting a sharing model to promote competition in the industry, he said.

Mr Somkiat said the Herfindahl-Hirschman Index (HHI) is commonly used to gauge market concentration conditions. The highest score on the HHI is 10,000, which expresses maximum market concentration.

A total of 1,500 points suggests a risk of market concentration, while above 2,500 indicates market concentration is at a dangerous level.

Based on research in 2017 by Ofcom, the UK’s telecommunications regulator, Thailand’s mobile market already had a high level of market concentration at 3,700 points, he said.

If the merger happens, the index is expected to surge to 5,016 points, said Mr Somkiat.

In 2011, the US prohibited the merger of two telecom giants ‒ AT&T and T-Mobile ‒ even though the merger was expected to push the industry’s HHI to only 3,605, versus a pre-merger level of 2,873, he said.

Prawit Leesathapornwongsa, an advisor to the NBTC chairman, said the NBTC has no bias in mind when considering the merger deal.

He said he was surprised by the absence of representatives from DTAC and True at the hearing yesterday, despite their earlier promise to attend.

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