3G and beyond: Making up for lost time as the roll-out of new services continues

Despite the delayed roll-out of 3G, the new services on 2100 MHz are thriving and 4G is not far behind. Indeed, the mood in late 2013 and early 2014 was optimistic because of the smooth transition to 3G, and both operators and regulators were beginning to contemplate services that just months earlier were not even considered a possibility. A quick jump to 4G is now in the works.

Due to the delay of 3G services, both operators and customers appear to be making up for lost time, transitioning to the new product far faster than expected. By early December 2013 more than 20m numbers had been ported from 2G to 2100-MHz 3G – about 10m for Advanced Info Service (AIS), 6m for TrueMove and 4.5m for Total Access Communication (DTAC). According to the regulator, these numbers added up to 25.6% of Thailand’s total subscriber base. Despite the controversy leading up to and in the days following the auction, the roll-out was seen to be broadly successful by operators, and this has encouraged the push onward to 4G.

A Quick Jump To 3G

In a way, the rapid migration to 3G services has been a vindication for the National Broadcasting and Telecommunications Commission (NBTC). The low reserve price and the 15-MHz maximum might have suggested an all-too-neat dividing of the market to some, but it kept all the main players involved, provided them licences and left them in a relatively healthy position. If the price were too high, a player may have dropped out from bidding, the operators may have been more capital-constrained or the price for services may have been too high for customers, and all that might have led to a less than healthy market. As it is, the major operators are rapidly building out their offerings, and customers are quickly buying in.

The sector still remains complex in the regions of the spectrum covered by concessions. In September 2013 the NBTC ruled that DTAC could not roll out 4G on 1800 MHz without the approval of CAT, the concession owner. DTAC has a free 25 MHz on the 1800 band that is not being used, but the NBTC insists that it is not up to the operator, but CAT Telecom (which would like the spectrum for its own use).

DTAC has been trying to use this block for some time. The company had a total of 50 MHz on 1800, but has only been using 25 MHz of it – for 2G services under its concession agreement with CAT, which expires in 2018. The operator asked the NBTC to allow it to access this unused 25 MHz for long-term evolution (LTE, high-speed wireless), or at least to allow it to return the spectrum so that the NBTC can put it up for auction. However, the regulator advised the company to negotiate with CAT.

DTAC said that it believes it can simply use the spectrum for 4G, as precedent exists. Operators were allowed to upgrade their 2G services to 3G without formal approval from the regulator, and they faced no consequences. As of late 2013 DTAC was in negotiations with CAT for the use of the spectrum for LTE, and a set-up has been proposed whereby the operator would build a 4G network and share it with CAT.

DTAC wants to get started and according to the company, around 1m of its customers have devices that would be able to use 4G service.

LTE Already

LTE is moving ahead. Indeed, as with 3G, the operators have been trialling it before the official launch. AIS tested 4G in early 2012 on a limited basis in Bangkok and Maha Sarakham province, while TrueMove started trialling LTE on 2100 MHz in central Bangkok in May 2014, offering the service on 2100 MHz to coincide with the roll-out of its new 3G offering. While some analysts questioned whether 2100 is the right frequency for LTE, the company decided to go ahead with the service and offered it at the highly competitive price of BT699 ($22.90) per month.

The big move on 4G is expected soon, when a formal and official spectrum launch is carried out. In late 2014 the NBTC plans to auction the 25 MHz at 1800 MHz that will be used until then by TrueMove and AIS’s Digital Phone Company. The regulator is also expected to auction 17.5 MHz at 900-MHz spectrum that is now being used by AIS.

The regulator would like to make this spectrum available for package bids, whereby an operator makes an offer to buy spectrum at a number of different frequencies. Meanwhile, the telecoms industry is keen to get going, saying that demand has been so high that users will experience congestion if the new spectrum is not available then and if LTE is not ramped up quickly.

The momentum of the 3G auction could lead to a successful 4G auction and roll-out. Other factors suggest that the timing is good. The launch of True’s infrastructure fund, the True Telecommunications Growth Infrastructure Fund, investing in ICT infrastructure, helps considerably. The weakest in terms of financials of the three major mobile operators is now on better financial footing and in a much better position to make an offer on new spectrum. The regulators are fearful of a duopoly and would be hesitant to undertake the auction if only two operators were in a position to bid.

Possible Leapfrog

Foreign investors may also take an active role in the process. While the regulators are on the watch for foreign dominance in the sector, opportunities should exist for involvement by non-Thais without contravening the 49% limits and the new rules preventing other forms of indirect control. DTAC has said, for example, that it is currently in negotiations with South Korea’s SK Telecom to work together to bid for 4G licences.

If the country can successfully transition to 4G, it could easily find itself catching up to its regional competitors and may even advance ahead of them. Thailand is in fact talking about leapfrogging right to 4.5G, adopting LTE Advanced. LTE Advanced is a standard approved in 2011 that offers 1 Gbps download speeds and 500 Mbps upload speeds, as compared with 300 Mbps and 75 Mbps for standard LTE.

At present most of the region is ahead of the country in terms of the adoption of 4G solutions. Singapore, Malaysia and Cambodia have the technology in place, while even Laos has made it available in Vientiane with service provided by LaoTel and Beeline. In one short year Thailand could put the delays caused by the concessions behind it and be back on track. Getting telecoms up to speed is important to Thailand. The country has done much to reform its economy to make it more competitive in the region, but telecommunications have been an area of noticeable under-performance. Having a 4.5G solution in place, at least in the major business areas, would make Thailand more attractive as a centre for commerce.

Implementation is the most important factor. The Thai mobile operators are quick to market a product, but past history suggests that actual performance can fall short. In early 2013 the NBTC received a flurry of complaints about the speeds available on the new 3G services. The rules require that 3G should provide minimum download speeds of 345 Kbps and upload speeds of 153 Kbps. However, the regulator said that customers were complaining that the new 3G service was slower than the previous 2G one. The NBTC has made consumer protection one of its main priorities, and it will need to keep a close watch on the 4G roll-out to make sure that the operators are meeting their obligations.

The Benefits Of So Few

Thailand has an advantage over regional competitors. While the regulators decry the rise of a potential oligopoly, the domination by three major players has its benefits. Such a small field can bring price leadership, solid average revenue per user and business continuity. Indonesia and India are making efforts to improve telecoms and are having trouble because they have too many players competing for share. In that way, Thailand is in a relatively good position. Its sector is not overly competitive, and that fact could help as it invests in rolling out expensive new technologies such as 4G.

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The Report: Thailand 2014

IT & Telecoms chapter from The Report: Thailand 2014

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