Key Insights On The Telecomunications sector of Thailand

Thailand's telecoms market is one of great contrasts. On the one hand, a poor fixed-line infrastructure provides minimal growth potential, whilst on the other a mature mobile market is facing saturation by 2009. The industry remains in the clutches of the Thai government, but at the same time, the other competitive cellular and broadband sectors are spurring on growth. Furthermore, although the NTC is slow in ruling on foreign ownership limitations and 3G licences, the regulator has been proactive in amending rules on access charges and interconnection.

Our forecasts for Thailand's fixed-line sector remain unchanged. A penetration rate of approximately 10.5% currently, we project, will rise to just over 11% by the end of 2011. This is not where the action lies. One only has to look at True Corporation's revenues for the first nine months of 2006 to realise this. As Thailand's only fully integrated operator, fixed telephony revenues declined by 19% y-o-y during 9M06, whilst during the same time data revenues increased by 20.5% y-o-y and its consumer broadband business grew by 66% y-o-y, now accounting for 6% of the operator's consolidated revenues. Meanwhile, True's mobile unit saw its subscriber base grow by a 1.4mn during a single quarter, taking its total customer base to 6.8mn and a market share of 18.5%.

Low tariffs and a deeply competitive market are the factors behind cellular growth, with BMI estimating some 9mn new customers for 2006, which would represent y-o-y growth of 29.5%. We project that by the end of 2011, Thailand will have 65mn cellular subscribers and a penetration rate of 96%. Handset availability and the quality of content will drive (or not) 3G growth, and we expect over 10% of all Thailand's mobile subscribers to be using 3G networks by the end of 2011. The fact that market leader AIS expects one fifth of its revenues to come from non-voice services by the end of 2007 suggests that next-generation mobile services are likely to become popular. The real growth engine remains Thailand's broadband business, and BMI projects that the 1.3mn subscribers expected in 2006 will become 8.3mn by the end of 2011.

Thailand remains in 13th position in BMI's Business Environment Rankings, with Vietnam actually reducing the gap between the two countries to half a point. However, there are signs that the Thai government and the NTC are beginning to turn things around. Rulings on access charges and agreements on interconnection rates are encouraging. There is still room for improvement, however. Thailand's telecoms market is no closer to liberalisation and the regulator continues to drag its heels on 3G licensing. Furthermore, an uneasy political climate continues to hamper foreign investment as seen most clearly by the government's vacillation over foreign ownership limits. However, in an important announcement for Thailand's foreign investor community, Telenor has pledged its future to Thailand and opened its regional office in Bangkok.