Planned merger of TRUE/DTAC could raise prices of services and also impact GDP growth, says study

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A recent study by the National Broadcasting and Telecommunication Commission (NBTC) suggests that Thailand’s gross domestic product (GDP) could be lowered and mobile phone users could end up paying up to 20 to 244% more for their service if the telecoms sector becomes a duopoly.

The study, conducted by the NBTC’s subcommittee that is responsible for gauging the economic impact of a potential merger between telecom giants TRUE and DTAC, presented the findings at its third public hearing.

The potential merger was first announced in November 2021.

The NBTC recently hosted a focus group meeting at its facility to discuss the merger agreement between True Corporation Plc (TRUE) and Total Access Communication Plc (DTAC) and during the meeting, Supachai Supachalasai, an economic analyst on the NBTC committee, said the committee found several potential out comes of a TRUE-DTAC merger by looking at two key areas.

  1. The impacts on the market competition
  2. The efficiency of the telecommunication service after the merger

Supachai said that the study examined samples of similar mergers in other countries as well as the consequences of those mergers and if those same scenarios could play themselves out in Thailand.

Potential side effects discussed by the committee were higher service prices, difficulty entering the Mobile Virtual Network Operator (MVNO) business, and digital disparity.

Pratompong Srinuan, a senior economic expert and acting executive director of the NBTC, stated that the study applied two main analysis models – upward pricing pressure and merger simulation which were widely used to analyze large merger deals in Europe and the US.

The study found that post-merger service prices could rise by 

  1. 2.03-19.53% if no collusion occurred
  2. 12.57-39.81% if tacit collusion occurred
  3. 49.30-244.50% if a cartel formed.

A duopoly could have a damaging impact on the industry and the economy, the study says.

Pornthep Benyaapikul, an economics lecturer at Thammasat University and a member of the NBTC subcommittee, stated that the damage of the TRUE-DTAC merger would depend on the consequences it imposed. These consequences were categorized as followed:

  1. The number of the remaining telecommunication operators after the merger, the less, the easier it would be to collude.
  • The size of the operators, if the companies were the same size, the easier it would be to collude.
  • The similarity of the service they provide, the more, the better to collude.
  • The comfortability for the company to inspect their adversary’s service price. 
  • The amount of time they have been in the market.
  • The difficulty for the new competitor to enter the market.
  • The efficiency of the supervising institution.

Natthapong Chantrathip, vice-president of Dhurakij Pundit University, stated that an increase in the Herfindahl-Hirschman Index (HHI) would cause numerous problems. If it was less than 1,000, the merger would not result in a monopoly, whereas if it was greater than 2,500, the merger would result in an unarguable monopoly. 

He also stated other countries usually had more than three telecommunication companies, so the merger was commonly not problematic. True and DTAC should prioritize the citizens’ benefit, Natthapong concluded.

Kanachok Tamkitcharoen, acting president of the Radio-Television Broadcasting Professional Confederation (RTBPF), stated that the NBTC should not permit the TRUE-DTAC merger if it exceeded the HHI rate by a factor of 12 as this was a clear monopoly of the telecommunication market. 

Impact on the Economy

The merger of TRUE & DTAC would also have a negative impact on the overall economy, the study concluded. 

The study also showed that the merger would heighten the inflation rate in three prospects as follows:

  1. Heighten by 0.05% – 0.12% if no collusion occurred
  2. Heighten by 0.17% – 0.34% if tacit collusion occurred
  3. Heighten by 0.60% – 2.07% if a cartel formed.

In terms of the GDP growth, the merger would possibly reduce the GDP growth as follows:

  1. Reduce by 0.05% – 0.11% or 8.24 – 18.05 billion baht if no collusion occurred 
  2. Reduce by 0.17% – 0.33% or 27.15 – 53.15 billion baht if tacit collusion occurred
  3. Reduce by 0.58% – 1.99% or 94.43 – 322.89 billion baht if a cartel formed

Analysts continue to remain skeptical on the planned undertaking saying that the deal will be able to be stopped and that these studies by the regulators ‘could’ be more of a way to show that they are trying to protect the public interest.

“The stock prices of TRUE and DTAC do not seem too concerned with the rumblings of discontent or even the calculated potential of collusion and cost to the public from the said merger.  Some players are just used to getting what they want when it comes to their corporate interests,” Yuanta Securities said in a note to clients this morning.


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