Thailand has been slow in the rollout of 3G services due to the country's political situation which led to the delay of the 3G spectrum auction, says analyst, who add that interested foreign operators will need to watch out for red tape.
Jim Eller, principal analyst of wireless infrastructure at ABI Research, noted that there is "no question" that the delay in the launch of 3G in Thailand has hurt the country's consumers and businesses. While the country has been making do with 2G services, Eller noted that the network capacity limitations of 2G has resulted in a lot of blocked call and bad network quality.
"Most of the world has had 3G mobile service for 10 or 12 years already [and] many countries are already launching 4G services. Meanwhile, Thailand is just rolling out 3G service now," Eller said.
The delay of Thailand's 3G auction was due to many reasons, he noted, adding that the old telecom regulator National Telecommunications Commission (NTC) "obviously bears much of the blame". In September 2010, an NTC-organized 3G spectrum auction was stopped by a court injunction at the last minute. While the court stated many reasons for the injunction, the bottom line was "just politics as usual", he said.
Operators in the country moved ahead last year to introduce 3G into their existing spectrum instead of waiting for an auction of the 2.1GHz 3G spectrum, he noted. For example, DTAC launched its 3G service in the 850MHz band in August 2011 while AIS (Advanced Info Service) has launched 3G services in the 900MHz band.
However, these launches were "technically illegal" as the operators did not have licenses for 3G service, said Eller said. State-owned telecommunications companies TOT and CAT have filed for court injunctions against the 3G launches, he added.
He added that TOT had a small 3G network in Bangkok in 2010 with plans to expand nationwide but the expansion contract became bogged down in controversy and lawsuits last year.
"TrueMove which launched 3G without approval is now in serious trouble because its concession was illegally obtained. The previous government ignored the illegality but the courts have suddenly decided to investigate under the new government," he said.
Expiring concessions throw up uncertainty
"However, the bigger story is the expiration of the concessions for the existing operators," said Eller. "With their concessions due to expire soon, why would the operators spend money to buy more spectrum?"
The concession model requires allows telcos to operate for a share if their income with the TOT or CAT. Operators license the two state owned telco's lines, in return for 20-30 percent of revenues.
The principal analyst noted that the Thai government needs to end the old concession model and provide a mechanism for the operators to convert their concessions to a new licensing scheme.
According to TelecomAsia, the concessions expire as early as 2013 for TrueMove, and the latest around 2018 for Dtac.
3G licenses won't come cheap
This year, the 3G spectrum auction for 2.1GHz spectrum is back on track in the second half of the year, according to the government.
Eller noted that it is not clear if the bidding will be intense as it will depend on the auction rules and license conditions which have not been fully defined. "Operators have already launched 3G in other spectrum, so the 2.1 GHz spectrum is less important. Also, everyone is looking forward to 4G in the not-too-distant future," he added.
He noted that the auction would generate "a lot less money" than it would have in 2010. However, he noted the licenses will not be cheap as the mobile business is big in Thailand with a lot of money to be made which will be reflected in the bidding.
Foreign investors should tread carefully
While licenses will not be cheap, neither will it be too expensive for operators to run profitable 3G business, said Eller. He noted it was unlikely to be similar to what European telcos went through in 2000 and 2001, when they went into debt after paying too much for licenses. "A lot of those auction winners eventually gave up their licenses."
The situation will not likely happen in Thailand as there are enough licenses and there would not be too many bidders, he added.
Commenting on a report that Chinese players are interested in bidding, Eller believes that China Mobile would be involved as it is "flushed with cash and is actively pursuing opportunities around the world". However, restrictions on foreign ownership in Thailand will see China Mobile partner with a local company, he noted.
According to John Stefanac, vice president and president of Qualcomm Southeast Asia-Pacific, with Thailand being one of the leading economies of Southeast Asia and having a tech-savvy population makes the country an interesting market from a business point of view for local and foreign firms alike.
However, Eller noted that lack of transparency, restriction on foreign ownership and "horror stories" of other foreign companies mean that foreign investors should be "very careful".
Stefanac believes that Thailand will make a significant contribution to the overall growth of 3G in this region because of the potential of the market. He added that the company will continue to work with key stakeholders and ecosystem partners to ensure that everyone can reap the benefits that next-generation telephony and high speed wireless broadband will offer.