TOT - one last push

State-owned TOT Corporation (TOT) surprised the market last week by announcing that it plans to go ahead with its IPO as early as January 2003.

State-owned TOT Corporation Public Co Ltd (TOT) surprised the market last week by announcing that it plans to go ahead with its IPO as early as January 2003 by offering 30% of its Bt47.7 billion capital to the public. Most likely, this announcement was in response to intense pressure from Information and Communications Technology Minister Surapong Suebwonglee on both TOT and the Communications Authority of Thailand (CAT) to improve their images with the public and with investors in order to pave the way for Stock Exchange of Thailand listings by early next year.

Pressure to cut international call rates. In mid-November, Minister Surapong publicly criticized both TOT and the CAT for not doing more to lower international call rates. Both TOT and CAT have been told to come up with a concrete plan to lower international call rates by the end of 2002.

One of the main contributing factors to Thailand's high international call rates is the Bt6 connection fee that CAT must pay to TOT each time an international call is made. For years the CAT has argued that this connection fee is justified since it helps cover the cost of international network connections.

However, in Minister Surapong's view CAT should not be using this connection fee as an excuse for maintaining high international call rates. Instead, the CAT should consider lowering its international call rates in order to encourage people to make more overseas phone calls.

Private sector telecom companies, including fixed-line operators TelecomAsia Public Company Limited (holder of a fixed-line concession in metropolitan Bangkok) and TT&T Public Company Limited (holder of a fixed-line concession in provincial areas), would also benefit from the removal of such connection fees paid to TOT. Minister Surapong also called for CAT to lower its Internet utilization fees in order to make this technology more accessible to the public.

TOT is being forced to look at refund options. TOT's poor image with the public can also be traced to the fact that it has still not come up with a plan on how to refund some four million fixed-line customers in Thailand the Bt3,000 they are each owed based on new telecom legislation passed by Parliament in 2001.

However, all that TOT has managed to do so far is send out a questionnaire earlier this year to its customers asking them what form of refund their would prefer, e.g. free TOT IPO shares, reduced monthly fixed-line charges or a free Thai Mobile (1900 MHz) mobile phone handset. A total of 1.4 million customers responded to TOT's survey, with nearly all of the respondents choosing either a Bt3,000 credit on their fixed line phone bill or a free Thai Mobile handset. Very few of the survey's participants said they would accept free TOT IPO shares in lieu of their Bt3,000 refund.

This mandated refund programme aims to reverse the past practice of collecting Bt3,000 as a deposit for every fixed-line installed. Both TelecomAsia and TT&T are required to obey this new law as well, but first they must get TOT's permission to refund the money to their customers.

As private sector companies, both TelecomAsia and TT&T are anxious to keep their customers happy by carrying out the letter of the law in a timely fashion. However, since this new law was passed last year, TOT has failed to refund its customers. Recently, TelecomAsia asked TOT for permission to proceed with its own refund programme featuring a total of eight options ranging from giving away free TA Orange mobile phone handsets to offering free Internet access.

Yet so far, TOT has blocked any move by both TelecomAsia and TT&T to refund their customers. Now that TOT is a public limited company, both consumers and private sector telecom service providers are keen to see action on this refund issue that is just one of the many sore points that must be addressed before its IPO can take place.

Meeting in late November will address the concession conversion issue. As a further indication that Minister Surapong is losing patience with TOT and CAT, he recently invited both agencies, as well as TelecomAsia, Advanced Info Service Public Co Ltd, Total Access Communication Public Co Ltd and TT&T, to meet with him to discuss the concession conversion issue this week. Minister Surapong has already gone on record as saying he will come up with a "third way" to resolve the concession conversion issue by the end of 2002, which, if achieved, might just make TOT's latest IPO target date of January 2003 achievable after all.

Daniel Nielsen is an analyst for the Brooker Group. For more information about the Brooker Group please click here.

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