Foreign-domination regulations spark international outcry
The Norwegian government is concerned with draft regulations preventing foreign domination of Thai telecom operators and says rules being drawn up by the Thai National Telecommunications Commission (NTC) could interfere with the rights and interests of foreign shareholders of Thai telecom firms.
Its concern follows similar protests made by the European Commission delegation to Thailand.
"The government of Norway is seriously concerned about both procedural and substantives issues raised by this draft notification," said a letter from the Norwegian Embassy in Thailand to the NTC earlier this month.
The Norwegian government is the major shareholder of Telenor.
Telenor Asia Pte Ltd, an indirect, a wholly owned subsidiary of Telenor, currently holds a 32.9-per-cent stake in Total Access Communication (DTAC) and a 25-per-cent stake in DTAC's parent, United Communication Industry (Ucom).
Telenor Asia also owns 49 per cent of Thai Telco Holdings, which controls about 61 per cent of Ucom.
"We are concerned that the proposed provisions of the draft notification infringe the laws of Thailand and unfairly prejudice the rights and interests of foreign shareholders of Thai companies as well as foreign companies," said the letter.
The NTC drafted the regulations as required by the amended Section 8 of the Telecommunications Business Act of 2001.
The commission's board approved the first draft on March 23 and posted it on its website, www.ntc.or.th, for interested parties to send comments via e-mail, with no deadline. It recently posted an amended draft on the website and invited interested parties to send comments by May 12.
The Norwegian Embassy's letter said the NTC should provide sufficient time for interested parties to review "such crucial issues" and for those issues to be openly debated.
"We are therefore concerned about the lack of transparency of the current process, as nowhere on the website is there any indication about when comments should be submitted," it said.
The European Commission delegation to Thailand expressed similar concerns about the draft regulations in another letter sent to the NTC early this month.
"We believe that the draft notification is unduly restrictive and discriminatory," said that letter. "It is clearly a step backwards in efforts to open and liberalise Thailand's telecom markets, and it sends the wrong signal to investors all over the world."
Besides DTAC, Shin Corp Plc is likely to be affected by the new NTC regulations governing foreign dominance. Currently, Cedar Holdings and Aspen Holdings, subsidiaries of Singapore's Temasek Holdings, own 51.98 per cent and 44.14 per cent, respectively, of Shin.
Aspen is wholly owned by Anderton Investments Ltd, which is in turn indirectly wholly owned by Temasek.
Cedar's shareholders include Cypress Holdings (46.55 per cent), Kularb Kaew (43.16 per cent), and Siam Commercial Bank (5.2 per cent). Cypress, which is indirectly wholly owned by Temasek, also owns 29.9 per cent of Kularb Kaew.
Shin is the parent of Thailand's largest cellular operator, Advanced Info Service Plc (AIS).
An analytical report by UBS Investment Research said that if read literally, the NTC regulations appeared to prevent any form of foreign control over a Thai telecom operator. However, the report suggests the real intent is to ensure that foreign involvement does not affect the local competitive landscape, and this may be reflected in the final version.
Under current Thai law, the multi-tiered shareholding structures that give Telenor control of DTAC and Temasek control of Shin are legal. Neither DTAC nor Shin is considered "owned" by foreigners, although both are mainly "controlled" by foreigners.
Although the law does allow foreign control, it is conceivable the NTC could use its regulatory power to disallow it, or at least make it more difficult in the case of the telecom industry.
The report said that if that happened, DTAC would probably the most at risk, because it was quite clear in terms of management structure that Telenor ultimately controls the company. AIS would also be at risk, but less so, given its existing shareholding and management structures.
The NTC will also require that TOT Plc and CAT Telecom Plc make sure their private concessionaires comply with regulations for preventing foreign dominance.
Actions deemed to be foreign dominance of local telecom operators include foreigners' shareholdings (as well as those of their nominees) exceeding the legal ceiling of 49 per cent, and foreign shareholders or their representatives having voting rights exceeding the entitlement of their actual shareholding.
Dominance also means foreign shareholders or their representatives appointing or removing key policy-makers of a Thai operator, the use of nominees to dominate them or the appointment of foreigners linked to foreign shareholders to key policy-making posts.
If dominance is exerted by a foreign government or foreign state enterprise, and the NTC believes that the dominance poses a threat to national security, it will consult with certain local agencies, such as the National Security Council.
If any of the local agencies agree that a threat to national security does exist, the NTC will order the licensee involved to end the foreign dominance.