Why the Shin Corp sale was
good business By David
Fullbrook
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?
(Copyright 2006 Asia Times Online Ltd. All
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