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Business >> Thursday March 15, 2007
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McKinsey Quarterly
Global Insights
TOT to assert its rights over network

Employees cheer board's tough stand


TOT Plc plans to reaffirm its ownership rights to all existing backbone telecommunications networks under a new strategy to act as a genuine national telecom company. The new board of the state telecom enterprise says it wants to scrap the revenue-sharing based concession agreements with all private operators and introduce a rental system instead.

The board, chaired by assistant army chief Gen Saprang Kalayanamitr, outlined its strategy at a meeting attended by more than 1,000 TOT employees. The meeting was also broadcast to its regional offices through video conferencing.

TOT board director Dr Vuthiphong Priebjrivat said the strategy was aimed at turning the organisation into a truly national telecom company. Employees welcomed the move with warm applause.

Dr Vuthiphong acknowledged that the strategy was sure to have massive impact and needed to have legal support. He also admitted that it would increase political and business tensions.

Private telecom operators have been at odds with TOT for months over the access charges stipulated in some concessions, while attempts to unwind revenue-sharing concessions in favour of a different business model have been debated on ad off for a decade.

Gen Saprang expressed strong support for the plan, saying TOT was an agency that managed the country's assets and had a duty to serve society.

The general said he regretted that in the past, TOT's assets were abused to create wealth for a certain group of people with the help of former state enterprise executives who disregarded national interest. He did not name the people.

He said that the board had agreed that all of the assets of TOT should be reorganised for social benefits.

Advanced Info Service president Wichien Mektrakarn said the idea was interesting, but needed more clarification, particularly on the rearrangement of the uses of the network and priorities.

Legal procedures might not be complicated, but a restructured deal would have an impact on shareholders, particularly when assets were marked to their book value. As a result, any change would depress the share values of listed companies that held operating concessions from TOT.

Dr Vuthiphong said the board wanted TOT to exercise its ownership rights of all assets under the build-transfer-operate concession agreements that it had with private operators such as AIS, the country's largest mobile-phone business with nearly 19 million customers.

Although in reality TOT did have the rights under the BTO agreements, it never exercised them in the past.

He then told the employees that manifesting its ownership rights was meant to cover all concession agreements, including fixed-line, mobile and optical fibre networks.

He said TOT was the owner of the superhighway, while private companies just rented the superhighway to drive on. In the future, he said, if TOT wanted the backbone networks for public services, then it could take them.

Dr Vuthiphong cited the example of optical fibres that could be used for television broadcasts for public services, instead of a few free television stations operated purely for commercial purposes. The strategy was not meant to bully private operators, but merely to utilise ownership rights of national assets, he insisted.

Using this system, private operators could scrap the revenue-sharing system to pay rents at fair rates instead, Dr Vuthiphong said.

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