Thai Cabinet's decision to make telecoms firms pay compensation for abuse of concessions is a small step forward for transparency and good governance
Thailand Cabinet's resolution on Tuesday for the information, communication and technology ministry (ICT) to negotiate with privately operated telecom concessionaires represents a golden opportunity for the Abhisit government to right some wrongs.
About a year ago the Supreme Court for criminal offences committed by holders of political office stated in a landmark ruling that fugitive former prime minister Thaksin Shinawatra abused his power while in office to benefit his family's majority shareholding in Shin Corp.
Shin Corp., whose majority shareholding was later sold to Temasek Holdings of Singapore at a price of over 70 billion baht (US$2.26 billion), was the parent company of Advanced Info Service (AIS), the country's largest mobile phone operator, which currently has more than 30 million customers.
Now, AIS and three other telecom concessionaires, namely Dtac, True and Digital Phones, face huge compensation claims from state-owned TOT Plc and CAT Telecom. The state agencies are seeking a combined 214 billion baht ($6.9 billion) in compensation for loss of revenue due to unlawful amendments to concession contracts and an excise tax levy while Thaksin held the top office from 2001-2006.
As a result of several contractual amendments, the revenue shares for TOT and CAT were significantly reduced, thus boosting the revenues of the private concessionaires at the public's expense.
Given that the Supreme Court has already made a ruling to such an extent, it is not necessary for arbitration panels to deal with these compensation issues, as suggested by some of the affected private telecom firms.
Thai Prime Minister Abhisit Vejjajiva and his Cabinet have, therefore, instructed the ICT ministry to hold negotiations with the private firms on compensation and related issues. The ministry is required to report back to the Cabinet the latest developments within 15 days. The premier also made it clear that state agencies that granted concessions to AIS, Dtac, True and Digital Phone should all return to the original concession contracts.
Unless the private firms gave their consent, the state has a right to initiate a process that will nullify the previous unlawful amendments that have hurt the public interest. Abhisit also reassured the public that his government will handle these multi-billion-baht issues in a transparent and non-discriminatory fashion, so as to ensure a level-playing field in the highly lucrative telecom sector.
Prior to Tuesday's (February 1) Cabinet meeting, the top executives of Singapore Telecom (SingTel), met with the Thai premier. SingTel has a 20 per cent shareholding in AIS and is affiliated with Temasek Holdings of Singapore, which is the majority owner of Shin Corp. Obviously the Singaporean investors are worried they will not be treated fairly, as AIS alone faces claim for 75 billion baht ($2.4 billion) in compensation from state-owned TOT, which granted the firm its mobile phone concession, which expires in the next five years.
Besides AIS, Dtac, whose major shareholder is Telenor of Norway, also faces a massive compensation claim amounting to over 90 billion baht ($2.9 billion), while True, which is majority-owned by Thai investors, is also subject to a similar compensation claim. Given that all three major concessionaires plus Digital Phone (affiliated with AIS) are subject to similar claims as a result of the unlawful contractual changes, it can be presumed that there is no government bias in taking this action to correct the wrongdoing.
Once all these issues are on the negotiating table, the government and private firms can be expected to reach a mutually beneficial agreement. But the final agreement must not affect the interests of more than 60 million users of mobile phone services in this country.
However, there will be a period of uncertainty surrounding the outlook for these telecom firms, which are all traded on the Stock Exchange of Thailand. So far, investors have taken a minor hit, but if sound agreements can be reached with the government, there shouldn't be major long-term damage.
Most importantly, the situation has given the Abhisit government the opportunity to set the record straight once and for all, and to demonstrate that the powers-that-be in public office will not be allowed to abuse their authority in order to create personal or family gains. This is a good chance for the government to uphold the public interest in the face of previous policy corruption.
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