The merger between Thailand’s DTAC and True Corp is on track as the companies have secured approval from their respective boards. This will go on to create the country’s largest mobile operator by subscribers. The merger now awaits regulatory approval.

Currently, there are three large players in the market – AIS, TrueMove and DTAC. The fourth operator – National Telecom (NT) – was formed in January 2021 after the merger of two state-owned telecom operators (CAT and TOT) and does not have any significant market share. One can say that the second round of consolidation has kicked in in the industry. If the DTAC-True merger is cleared by the regulator, it will shrink Thailand’s mobile landscape to a duopoly, with the new merged entity controlling more than 50% of the market.

Thailand’s Telecom Landscape

The merger would send ripples across the telecom ecosystem and networks would be impacted one way or the other. Some of these implications are as under:

Advantages of scale

A major objective of the merger is to scale the business size to drive investments and cost efficiencies, especially when it comes to 5G. True’s high debt level and DTAC’s limited 5G service offering make it challenging for the two to make technology advancements without any immediate returns. The merger will strengthen the position of the new entity with a higher market share, improving its ability to absorb costs and set up a stronger 5G infrastructure with pooled resources. This, in turn, will improve its ability to effectively take on the competition.

On the other hand, AIS has enhanced scale, financial strength and capabilities needed to accelerate growth and support network expansion. It is way ahead of its competitors with more than 44 million subscribers and benefits from economies of scale to achieve return on investments.

Expansion in spectrum portfolio

DTAC has been continuously losing subscribers amid intense competition, lack of 5G services and low network coverage owing to inferior spectrum holding. The merger will lead to True combining its 990MHz of spectrum holding with DTAC’s 270MHz, resulting in enormous spectrum availability of 1,260MHz with the new entity. This is a big value addition as large spectrum holding is the key to rolling out new services and improving capacity with the growing demand.

Operator Spectrum Portfolio Before and After Merger

Technology-driven growth opportunities

The new entity is seeking to raise $100-$200 million in venture capital for the proliferation of the digital ecosystem. The race for the advent of new technologies and services is likely to get a push from this merger. Operator will aim for 5G leadership and capturing enterprise opportunities with AI, cloud technology, connected devices, Industry 4.0 and more.

Wave of consolidation

The scenario can be compared with consolidation in various other markets of APAC. Higher 5G investment requirements and intense competition are the major reasons for several markets of the region to have three or just two major operators. For instance:

• Indonesia: Indosat Oordeoo and CK Hutchison completed their merger in January 2022 and now the largest three players control more than 90% market share.
• Malaysia: There are three major operators in the country. Axiata and Telenor are in advanced discussions to combine their Malaysian operations, i.e. Celcom and Digi. The merged entity will be the largest mobile operator with over 44% subscriber market share.
• India: The Indian telecom market has seen significant consolidation, from a peak of 15 operators in 2012 to just three with a noteworthy presence in the last few years. But the market has a near duopoly as Airtel and Jio are leading the market, whereas Vodafone Idea is bleeding with inadequate investments and a high churn rate among subscribers. It may not come as a big shock if the market shrinks to two major players.

On the contrary, the Philippines had to move away from duopoly to inject much-needed competition. The regulator awarded the operator license to Dito Telecommunity as the country’s third operator since it became necessary to improve service provision and drive down prices. Dito launched mobile services in March 2021. Another entrant, NOW Telecom, secured the license in September 2020 but it is yet to launch commercial services.

Way ahead

Thailand has a highly developed mobile market that has seen strong growth of its 4G subscriber base. While mobile connectivity is upstanding, its quality has the capacity for further enhancement. According to Ookla’s Speedtest Global Index, Thailand ranked 58^th (out of 142 countries) with a median mobile download speed of 33.49Mbps in March 2022. It has better network performance compared to many Southeast Asian countries but is still behind Brunei (71.38Mbps), Singapore (67.99Mbps) and Vietnam (33.90Mbps). It is now navigating to 5G and the market will be driven by increasingly faster speeds at competitive tariffs.

The merger is in its final stages but it may face regulatory roadblocks over the fear of a narrow playing field. The new operator is expected to harness its combined resources to drive network performance. Further rollouts of its network to enhance quality and speed, along with investment in 5G technology, will be the key areas of development. Despite the endorsed benefits, long duration of the merger and any instability in the quality of services during the process can create an adverse impact on consumer sentiments. This, in turn, would be beneficial for AIS, with a likelihood of subscribers upgrading plans from LTE to 5G. Another market implication could be the rise in tariffs and vanilla service offerings amid reduced competition. Taking clues from the Philippines' trajectory, the regulator needs to make a cautious decision on this merger and ensure the market does not go down the same road.

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