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Thai telecoms spark debate in attempt to rework airwave deal

Critics cry moral hazard as carriers seek to change payment terms

Thai Prime Minister Prayut Chan-ocha likely heard the criticism of the idea of easing payment terms for mobile carriers.   © Reuters

BANGKOK -- Thailand's two leading mobile carriers have sought relief from the government on steep payments for wireless spectrum they won at auction, sparking criticism that they are trying to change the rules of the game after the fact.

Market leader Advanced Info Service and second-ranked True Corp. each won 4G network licenses for about 76 billion baht ($2.44 billion at current rates) at government auctions in December 2015 and May 2016, respectively. Each was to pay about 20% in the three years through 2018, and the remaining roughly 60 billion baht in 2020.

But the telecom companies have asked Thailand's military government to stretch the latter payment over five years, claiming the lump sum poses too great a burden.

A deferred payment would amount "to the nation taking a loss to lighten the burden on corporations," said Somkiat Tangkitvanich, president of the Thailand Development Research Institute, a renowned private think tank.

A proposal since backed by the National Broadcasting and Telecommunications Commission would charge True and Advanced Info Service interest on the spread-out payments, but at the Bank of Thailand's policy rate of 1.5%, not at higher market rates or the punitive 15% charge they would incur by defaulting.

While the carriers' winning bids were high by international standards for spectrum auctions, the companies could raise funds through asset sales or borrowing to cover expenses they are unable to pay out of cash flows.

Nothing stopped their managements from withdrawing from the auction if they concluded the price did not make economic sense. Another big carrier -- Total Access Communication, a unit of Norway's Telenor -- backed out partway through the bidding, but might have carried on had it known it could change the payment conditions later.

At one point, reports that the junta appeared likely to grant the companies' requests sent their shares higher, netting investors a profit in advance. Critics worry that letting the carriers and their shareholders profit from demanding favors creates a moral hazard that encourages more such behavior.

Faced with criticism, the NBTC and the government appears to have done an about-face and now seems unlikely to grant the requests.

The telecom regulator may have been motivated by a desire to lighten the burden on the winners in order to encourage participation in future auctions, possibly out of a recognition that the auction rules were partly to blame for the sky-high price. Either way, the episode seems likely to leave both industry executives and government officials with a ringing in the ears.

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