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Thai government advised to reduce state operator stakes

The Thailand Development Research Institute (TDRI) has called for the country’s government to divest some of its holdings in both state-owned telecom operators.

Currently, the Thai government holds 100% of both TOT and CAT. The TDRI believes that this figure should be no more than 51% of each operator, with chairman Somkiat Tangkitvanich extolling the virtues of a stake reduction.

According to Somkiat, the government needs to end “the tradition of political intervention” by reducing its holdings in the operators, thereby allowing private investors to foster greater competition. This would boost the performance of the flagging state operators.

“Any wholly-owned state enterprise has already proved a failure when it cannot create a sustainable business model,” said Somkiat, who added that the continuous cycle of board and management members was inevitably damaging business continuity.

The state operators have suffered following Thailand’s move from awarding concessions to auctioning spectrum to the highest bidders. Many previously issued concessions are on the verge of expiring, leaving TOT and CAT’s futures in doubt.

While CAT has forecast a profit of THB1.7 billion profit on revenue of THB55 billion, TOT’s H1 loss was THB1.3 billion ($39.5 million) and this is set to more than double for the full year (a total loss of THB4.57 billion).

However, Somkiat doesn’t share the government’s belief that a merger between TOT and CAT would solve problems faced by both operators.

Thailand’s State Enterprise Policy Commission, which was founded by the National Council for Peace and Order to assess the country’s state enterprises, has ordered TOT and CAT to submit cost-cutting proposals. This will involve shedding non-core businesses and streamlining focus.

The plan has the approval of Thailand’s cabinet. Meanwhile, the ICT and Finance Ministries has confirmed that they have been discussing whether the two operators could be merged. However, there is also the possibility that each operator could be broken up into around five or six subsidiary units which could then form private partnerships.

 

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