OBG talks to Wichian Mektrakarn, CEO, Advanced Info Service (AIS)

 Wichian Mektrakarn, CEO, Advanced Info Service (AIS)

Interview: Wichian Mektrakarn

How is the growth in mobile traffic affecting the requirements for network upgrades?

WICHIAN MAKTRAKARN: Strong expansion in the non-voice part of the market has underpinned operators’ growth recently, mainly in the form of data usage. We expect this to continue over the next 3-5 years. Although mobile penetration is over 105%, basic voice service has also increased following the economic recovery since 2009 and improved consumer sentiment. The trend is quite good. AIS is in a relatively different situation from other carriers. We do not have bandwidth capacity for 3G, so we have to re-farm our bandwidth.

As users want access to high-speed data services with their smartphones, we have to offer choices to the customer if we do not want to lose clients to our competitors. We cannot let that happen. Quality-wise our network is very comparable in providing services. While our competitors have set up a lot of new stations and equipment, it is still very difficult for them to optimise their network because the environment is very dynamic – we are all operating in the same boat.

In the longer term we may be in a slightly disadvantaged situation, so we are looking for a new licence, which would provide us enough time to invest in additional bandwidth. We are trying to maintain our profitability during a new round of investment in 3G. Based on previous 2.1 GHz spectrum auction conditions, our new network will cover 50% of the population in two years and 80% in four years.

How can average revenue per user (ARPU) levels keep up with growing demands for data?

WICHIAN: We have looked at new demand for data usage, although we do not yet know how fast it will continue growing. The introduction of faster services, such as 4G, will bring a lower price per byte, and people may use more. Pricing competition in voice is benign due to the maturity of the market. Data is a growth market and operators have to spend more on marketing and capital expenditures to capture the data demand. We are avoiding unlimited data plans, like many other operators, as these fixed-price plans are less profitable. Tariffs that require people to pay according to their own usage ensures fair treatment for everyone.

In the long term, ARPU should be relatively stable, with the slight decrease in voice revenue offset by a significant growth in non-voice revenue. In the medium term, investment in Thai telecoms will be in the 3G network based on the licensing regime, which effectively means a more level playing field and fair regulations. Investment return is expected to be decent – between 6% and 25% – supported by demand for mobile internet and savings from reductions in regulatory fees.

How does the launch of mobile virtual network operators (MVNOs) affect the market?

WICHIAN: MVNOs offer another way to tap into this market. However, a pure MVNO strategy lacking synergy with other businesses is hardly going to survive against the three major operators. Since 2010, there have been five MVNOs operating with the Telephone Organisation of Thailand (TOT), but they cannot all be successful, as TOT has limited coverage and service quality cannot compare. The five MVNOs’ lack of business synergy or differentiation makes them less attractive compared to the three major operators. However, some companies such as Tesco Lotus or Air Asia have expressed interest in being MVNOs – they will cross-sell rather than being pure mobile service providers.

There are some unresolved issues for us with MVNOs. For the established operators, if we get involved with MVNOs, would our planned bidding for 3G licences affect a parallel bid for an MVNO licence? Indeed, anyone who might want to participate in a 3G licence auction may not be allowed to participate in a MVNO licence. The second issue is what the exact terms and conditions of an MVNO licence would be. We have not seen the numbers yet, so we cannot judge – if they fit with our business plan we may get involved with MVNOs, but we cannot yet justify this to our shareholders.

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Wichian Mektrakarn

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The Report: Thailand 2012

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