3G network takes step forward

ANALYSIS: TOT gives telecom giants a head start in developing 3G infrastructure as state regulator takes shape

Thailand's mobile phone sector has taken a small step forward after state-owned TOT Plc awarded a group led by Samart Telecom and Loxley a 16.29 billion baht contract to build a third-generation wireless network.

High-speed telecom services are expected to be available in 13 provinces within six months, and nationwide within one year.
The move came a day after True Move, the country's third-largest mobile operator, signed contracts with CAT Telecom to extend the term of its own concession agreement as well as expand into 3G services. True Move, a unit of True Corp, expects to offer nationwide 3G services within two years.
Demand for 3G has jumped sharply in recent years thanks to the popularity of smartphones such as Apple's iPhone or Research in Motion's BlackBerry handsets. New tablet PCs such as the iPad have also raised customer expectations for high-speed networks to gain access to the internet for multimedia and data applications.
But efforts to launch 3G networks that can transmit data several times faster than today's GSM systems have been delayed for years due to political  and regulatory infighting. The three major telecom providers _ Advanced Info Service, Dtac and True Move _ currently offer 3G services in limited areas under trial arrangements but cannot begin full commercial services without a licence.
But efforts to sell off 3G licences must wait until the formation of the National Broadcasting and Telecommunications Commission, a body that will replace the National Telecommunications Commission (NTC) as the primary regulator of the telecom sector. A planned auction of 3G licences by the NTC was scrapped at the last dhmoment late last year after a court challenge over the bid's legality.



But operators may still seek the right to sell 3G services by forming partnerships with the state-owned TOT Corp and CAT Telecom as so-called mobile virtual network operators. Under an MVNO arrangement, a company can market services under its own brand while using a network owned by either state enterprise.
The TOT contract awarded yesterday aims to give the state enterprise a headstart in developing 3G infrastructure as AIS and Dtac wait for the country's new regulator to be formed.
The winning SL Consortium won with a bid of 16.29 billion baht, or  6.59% lower than the reserve price and beating out competitors such as Ericsson, China's ZTE Corporation and a group comprising Advanced dhInformation Technology and United Communications.
SL Consortium is 65% owned by Samart Communications Services, a unit of Samart Telecom, and 35% by Loxley Wireless, a unit of Loxley Plc. Shares of Samart Telecom on the Stock Exchange of Thailand rose 2.46% yesterday while Loxley gained 5.34% even as the main market closed down 0.49%.
The bid was held by the TOT yesterday morning after the Administrative Court late Thursday rejected petitions by Ericsson and ZTE Corp to halt the contract auction due to irregularities. The TOT board is due to formally approve the contract with SL Consortium on Feb 11.
The 3G contract specifications call for three elements _ 17.44 billion baht for the procurement of network equipment, 2 billion for network upgrades for TOT's existing 3G network in Bangkok and 540 million baht as a reserve.
Within 180 days of the contract, 3G services are to be available in 13 provinces: Chon Buri, Rayong, Songkhla, Surat Thani, Phuket, Chiang Mai, Chiang Rai, Lampang, Phitsanulok, Udon Thani, Nakhon Ratchasima,  Khon Kaen and Nong Khai. The remaining provinces in the country would be covered within 12 months.
Once TOT's 3G network is fully in place, it would give the state enterprise the ability to either roll out its own mobile service or offer bandwidth to a private operator under an MVNO arrangement.
A number of MVNO providers are already in operation, though most of them are limited in scale to providing 3G wireless internet access aimed at laptop users in urban areas. In any case, industry experts say the MVNO system also operates under a regulatory cloud because of different interpretations of the Frequency Allocation Act.
Section 46 of the act says a radio frequency licence is an exclusive right awarded to a licensee and may not be transferred or assigned to others, raising questions about whether TOT Plc can allow others to use its network under the MVNO system.
Tom Kruesophon, head of virtual network operator Tune Talk Thailand, said the government should clarify the wording, to prevent problems for TOT and MVNOs. The business model for MVNOs also was impractical, he said. The TOT charges MVNOs 70 baht for a 3G SIM card even though the card itself costs just 10 baht.