11-hour marathon meeting approves mega merger to create Thailand’s largest mobile operator

A 11-hour meeting and nearly a year after the mega merger of Thailand’s 2^nd and 3^rd largest mobile phone operators – True Corporation Plc (TRUE) and Total Access Communications Plc (DTAC), was announced, the regulators – National Broadcasting & Telecommunication Commission (NBTC), gave their approval but with as many as 5 conditions attached.

TRUE and DTAC first announced their plans to merge on November 22, 2021, a move that had rocked the telecommunications industry in Thailand which was dominated by just 3 players with Advanced Info Services Plc (ADVANC), being the market leader.

The decision to merge for TRUE & DTAC came as they continued to fight for market share and spectrum leaving the likes of DTAC to start to back out from some of their expansionary plans including not participating in the bidding of many of the highly prized spectrums.

DTAC, which was until the merger approval, majority owned by Norwegian telecom giant – Telenor SA, has been gradually undertaking a gradual exit from most of its markets it operated in Asia. Earlier this year the Malaysian regulators gave its approval to merge Telenor owned Digi.com Berhad, which was Malaysia’s 2^nd largest mobile operator, with Celcom Axiata Berhad, Malaysia’s 3^rd largest mobile operator, to create Malaysia’s largest mobile company.

Telenor and CP Group of Thailand would hold a third each in the new merged entity with China Mobile holding 10% and the rest will be free float on the Stock Exchange of Thailand.

The move to merge in Thailand would make the merged entity a market leader with a market share of 55% leaving ADVANC with a mere 44% market share in the highly competitive market.

The NBTC had been deliberating the issue of the merger since the start of this year when both TRUE & DTAC had put forward their proposal to merge. The NBTC then cited that its board was going to retire and therefore it was best that the new board make a call on this issue, in a move that many thought was a way to put the problem on someone’s head.

The new board held meetings after meetings and came up with various excuses to avoid making a call but on October 20^th the meeting that started at 09:30 hrs. dragged on for more than 11 hours to finally vote which saw a split vote.

Out of the 5 NBTC commissioners, 2 voted against, 3 for, and 1 abstained – resulting in a tie vote. The NBTC regulation allows the chairman of the meeting to cast an additional vote in the event of a tie-break. In this case, the chairman voted for the merger, and thus the deal was approved.

The move was welcomed by analysts who say that the expected outcome of the meeting and clauses was not as bad as they had anticipated.

“We were pleased to see that the NBTC scrapped the clause on the moratorium on spectrum amalgamation and the clause on the board seat requirements for the subsidiary companies. We felt these clauses do not benefit consumers and would have been a dealbreaker for the merger,” Thapana Phanich analyst at TISCO Securities said.

“Although a few clauses appeared tougher on the NewCo (such as raising 5G coverage to 85% in three years rather than 80% in five years), we believe that the new requirements are non-material. We are also unconcerned about the cell site requirement (NBTC did not put a restriction on the number of towers), call center staff requirement,” he added.

Attached Clauses

But the deal approval came with clauses attached and among the clauses are things such as price ceiling and price controls. There is also a clause that requires an independent verification of cost structure and service fee for at least 5 years.

The NBTC said that the merged company also must show the service rates such as voice, data, messaging separately and should be based on average cost pricing.

The stipulated clauses are as follows

1. Determination of the price ceiling of the average service fee
   1. The average service fee be reduced by 12% by using the new price average method. by weighting according to the number of users in each promotion (weighted average) within 90 days after the merger.

• Provide a choice of separate prices for each service as an alternative.

• Submit cost information and necessary information to an inspection agency.

• Let the business merger notify the service user for acknowledgment in order to have an audit and have penalties in case of not being able to do so, such as a fine of a percentage of revenue or impose fines in steps or go as far as revoking the license.

• Service pricing using the average economic price (Average Cost Pricing)

• Submit the information in accordance with the NBTC Notification Re: Criteria and Procedures for Preparation of the Telecommunications Ledger Report B.E. and submit it to the Office of the NBTC every 3 months or upon request of the NBTC for use in cost structure review.
  • Service rate structure and used to calculate the average total cost the prices in the competitive market (Average Cost Pricing) and the Marginal Cost (MC) are current and accurate.

• Provide experienced consultants expertise verify cost structure data service rate or data on various rates of the telecommunication industry abroad for not less than 5 years and the NBTC to determine the applicant for business merger to be responsible for all expenses incurred from the procurement and employment of consultants.
  • The consultants must not be associated with, linked to, or have conflicts of interest, directly or indirectly, with the business combination applicant to verify the accuracy of information in accordance with to verify the cost structure. The service rate structure and calculate the correct average cost (AC) and marginal cost (MC) for each service such as voice service, data service, messaging service, etc. when the business integration is completed within 1 month.

• This information needs to be done each quarter for period of 10-years.

• There must be a fixed and displayed mobile phone service rate separately for each service (Unbundle), such as voice service, data service, messaging service, etc., or promotion.

• The merged entity must provide convenient, fast, easy access, comprehensive and easy to purchase, change (increase, decrease) the use of mobile phone service according to the needs of end users without limitation. The details of the service must be displayed. Service rates are classified according to each service or promotional service rates as well as methods conditions for choosing to receive services expressly and current.

• Maintaining consumer choice for consumers by not merging True Move H Universal Communication and Dtac Tri-Net companies and keeping them as separate brands of service for a period of 3 years.

• Service Contract, True Move H Universal Communication and Dtac Tri-Net shall maintain the terms of the contract and agreement between the company and the user. Including the benefits received under the contract or agreement for the period specified in the contract. Unless it is a change in the terms of the contract that is beneficial or beneficial to you and has been agreed by the user.

• Undertake public relations of service for the confidence of users after the business merger, True Move H Universal Communication and Dtac Tri-Net are required to publicize and disseminate information in order to make users aware of maintaining the quality of service and fair service fees and must establish guidelines for maintaining the quality of goods and services after business integration. including conditions for conducting public relations for True Move H Universal Communication and Dtac Tri-Net company to continue.