David Fullbrook
Asia Times
23 Feb 06
http://www.atimes.com/atimes/Southeast_Asia/HB18Ae01.html
Whatever the political motives for the Shinawatra family selling Shin Corp, one thing is certain: they sold at the top of the market.
Some nifty, dubious advice saved the family paying about US$450 million tax on the $1.85 billion sale to Temasek, a secretive Singaporean government investment fund, in January. That upset some Thais who feel that Prime Minister Thaksin Shinawatra’s extremely wealthy family should be setting an example by paying tax, rather than appearing to condone the tax-evasion culture.
Many Thais dislike paying taxes, seeking to avoid them, which is legal, and evade them, which is not, because corrupt politicians and officials steal significant amounts from the national coffers.
Tax-dodging was not the only issue that gave Thaksin’s critics – led by Manager Media Group founder Sondhi Limthongkul – who have been accusing him of abusing his powers since last October, more reasons to call for his resignation. They say the sale to foreigners is unpatriotic, a charge made all the stronger by the nationalist feelings Thaksin has been stoking since he formed the Thai Rak Thai party in 1999, going on to win landslide victories in the last two elections.
That struck a chord with many Bangkokians who think the Shinawatras sold national assets. Never mind that Thaksin built the company himself, albeit with a little help from friends in high places along the way, but no money from the state. However, similar deals by other tycoons in Thailand have passed more or less without comment, such as the Bencharongkul family’s selling control of No 2 mobile-phone network DTAC to their Norwegian partner Telenor.
Many believe Thaksin told his family to sell Shin Corp to raise money for political campaigning, or to stash overseas in case he has to stand down in a hurry. But Thaksin says the family sold so he could focus on running the country without being accused of having conflicting interests.
Putting politics aside, however, reveals strong commercial reasons for the sale. Competition is set to increase, technology is changing rapidly, and profits seem certain to fall sharply.
The challenge of new technology
Come December many sectors of the Thai economy, including telecommunications, will open up to full foreign competition under World Trade Organization rules. That should end, on paper at least, discrimination against foreign business people and investors. They will be able to own 100% of a company, against 49% under current laws.
This means one thing for telephone companies, mobile or otherwise: more competition. Shin Corp’s cash-cow mobile-phone network AIS, the kingdom’s largest, will probably suffer falling profits. Foreign companies could well decide either to lease capacity on incumbent networks or build their own.
Using wireless technology such as wi-fi (wireless fidelity) makes building mobile networks cheaper and faster than using such systems as GSM (global system for mobile communications) or CDMA (code division multiple access). Such mobile networks, saddled with expensive licenses and extensive and costly infrastructure, are going to see profits savaged.
Wi-fi telephones are in essence hand-held Internet terminals configured to make telephone calls easy. Surfing the Internet, booking cinema tickets and checking restaurant addresses will be a lot easier, not to mention cheaper, than on an ordinary mobile phone. As well, because the new phones all use the same wi-fi technology, which is compatible with upcoming WiMax (Worldwide Interoperability for Microwave Access), they will work anywhere in the world. Expensive roaming charges seem unlikely.
There are some drawbacks; they do not work very well in cars or trains traveling fast. They will be limited to city centers in the beginning. However, they promise to be so cheap, even free, that consumers are certain to snap them up. Many people may keep a conventional mobile as an occasional backup.
Nokia is already adding wi-fi to many of its GSM and 3G (third-generation) phones. Mobile-phone companies can, however, stop customers from using wi-fi to make telephone calls.
Skype, which offers free or very cheap phone calls over the Internet, has a simple alternative. It plans to start selling by next month a hand phone, made by Netgear, which only works with wi-fi. People can use it with their home wi-fi network or at the 20,000 Skype partner wi-fi hot spots worldwide. That number could well swell to hundreds of thousands of hot spots this year, because Skype has teamed up with Google and Fon to help link millions of home hot spots to a commercial network.
In the United Kingdom, Cloud and British Telecom are building wi-fi networks that will fully cover London and some other major cities this year. Something similar is already planned for Bangkok by True, the only Thai telephone company to offer mobile, land lines and broadband. It is owned by Charoen Phokphand, a conglomerate controlled by Dhanin Chearavanont, who supported Thai Rak Thai’s rise to power.
Wi-fi phone networks are just the start. Around 2008, WiMax, which has a range counted in kilometers, not meters, and can transmit data many times faster than wi-fi, will be ready for use in mobile hand-held devices such as telephones. WiMax is already competing with land lines to offer broadband services in Hong Kong and some parts of the UK and the US.
Shin Corp’s other star asset, the Ipstar satellite, which provides broadband Internet across Asia, was already fading when launched five years late in 2005. Back in 2000 there were millions of people hungry for broadband. These days broadband lines, wi-fi and the emerging WiMax relegate Ipstar to communications in remote areas and backup links for telephone networks.
Little wonder Thaksin’s family accepted the Singaporean offer.
Saint Thaksin and the Singapore Inc mystery
With the Shinawatra family now out of the telephone business, there should be no obstacle to the formation of the National Telecommunications Commission, a powerful “independent” regulator promised by the 1997 constitution. If the commission, perhaps nudged by Thaksin, judged that mobile-phone companies were overcharging, it could order them to cut prices, pleasing every voter, especially tens of millions of farmers and factory workers.
That will do Thaksin no harm at all come election time in 2009 if not before. And after his family’s $1.85 billion sale, he will have no trouble financing another glitzy Thai Rak Thai campaign.
All that money goes down well with those Thais who believe success and wealth in this life are rewards for good deeds in previous lives. That makes Thaksin not far off being a saint.
Even after splurging on an election, the Shinawatras could easily afford a return to the telephone business using wi-fi or WiMax, making more money, and earning more merit.
That still leaves the biggest mystery of all unsolved, though. Why on earth did Temasek buy?