A telecom analyst said that in the worst-case scenario, if the interconnection charge is put on hold, the implication of the separation of the excise from the concession fee on telcos would be much more severe.

This is because there will be no gains from termination of the access charge for Total Access Communication (DTAC) and True Move and no interconnection revenue for Advanced Info Service (AIS).

In this scenario, even if the Finance Ministry cuts telecom excise to 2 per cent, the operators will still be negatively affected in terms of net profits next year.

The IC regime obliges all telecom operators to share voice and data revenue between networks involved in calls. It is currently under threat from a legal challenge.

The access charge is a bilateral contract between TOT and CAT Telecom's three private cellular concessionaires, DTAC, True Move, and Digital Phone Co, for connecting to different networks via TOT's network.

Some operators have proceeded on the basis that the interconnection charge replaces the access charge, but TOT has yet to terminate the access charge over concern that it will lose Bt14 billion as a result.

Making matters worse, the Cabinet will consider on December 19 revoking a Thaksin administration rule which allowed private telecom operators to deduct excise payments from their concession fees, effectively ending their ability to deduct and calling for two payments with a substantially higher sum.

Current telecom excise taxes, introduced by the Thaksin government in 2003, are 11 per cent for mobile phones and 2 per cent for fixed lines. However, the Finance Ministry is expected to announce a new, lower excise rate to avoid additional costs being passed on to subscribers.

The analyst said that if the excise rate is fixed at 2 per cent, there is no interconnection charge and payments must still be made for access charges, AIS's net profit next year will decline by 7 per cent, DTAC's by 13 per cent and True Move's by 25 per cent.

If the government separates excise payments from concession fees from the beginning of next year, it is estimated that TOT will receive an additional Bt9.4 billion from full payment of concession fees, while CAT will receive an extra Bt13 billion. TOT owns the concessions of fixed-line operators True Corp and TT&T, as well as that of cellular operator AIS. CAT owns the concessions of mobile operators DTAC, True Move, and Digital Phone Co.

The status of the interconnection charge is uncertain after a Rangsit University lecturer petitioned the Central Administrative Court to terminate the charge, citing as grounds its impact on the industry. The court is considering whether it will accept the case.

Another analyst estimated that if the interconnection charge remains in place, AIS stands to gain Bt3.5 billion in payments per year. DTAC is in a neutral position, with no net loss or gain from interconnection charge payments, while True Move will pay roughly Bt2 billion in interconnection charges during 2007.

If access charges are terminated and the interconnection charge remains, DTAC will not be affected by additional excise - even if the rate is kept at 11 per cent - because its saving from cancellation of the access charge will be a huge Bt6.2 billion in 2007.

AIS will not gain from cancellation of the access charge, but it will gain Bt3.5 billion from interconnection charges per year. The analyst said that if the telecom excise rate is set at a figure higher than 4.5 per cent, it will eat into AIS's net profit.

If access charges are cancelled, True Move will gain Bt3.5 billion, but it will pay Bt2 billion in interconnection charges, giving it a Bt1.5 billion net gain. However, if the excise rate is higher than 5.5 per cent True Move will be negatively affected.

Currently, AIS has more than 17 million customers, while DTAC and True Move have more than 11 million and 5 million, respectively.

Telecom Reporters

The Nation