The Looming Merger between Two of Thailand’s Major Communication Service Providers Should Stimulate AIS to Lean into 5G

Three major Communication Service Providers (CSPs) serve Thailand’s telecommunication needs: Advanced Info Service PLC (AIS), True Corporation Public Company Limited (True), and Total Access Communication PLC (DTAC). Currently, AIS holds the largest proportion of the market (44%), followed by True with 34% and DTAC with 21% of market share. Service revenue has been on an upward trajectory at 2.9% Year-over-Year (YoY) to ~US$877 million (THB33.3 billion) for Thailand’s top wireless network provider, AIS. Meanwhile, service revenue for both True and DTAC experienced declines of 2.5% YoY, amounting to ~US$685 million (THB26.0 billion) and ~US$356 million (THB13.5 billion), respectively. The Average Revenue per User (ARPU) for mobile services generally decreased for the three CSPs. At AIS, the company saw a 4.3% YoY drop in ARPU, despite a 10% to 15% increase in 5G subscribers. True and DTAC recorded declines in their ARPU as well, with 8.6% YoY and 7.7% YoY declines observed, respectively.

In October 2022, a US$7.3 billion merger between True and DTAC was approved by the National Broadcasting and Telecommunications Commission (NBTC) subject to several conditions, some of which concern service fee controls and ceilings, and independent verification of cost structures and service pricings. Most crucial would be the new entity’s requirement to put in place 5G service coverage to 75% of Thailand’s population within the first 3 years of the merger. A successful merger will see the new enterprise command approximately 55% of the local CSP market. Telenor, the Norwegian firm that is behind DTAC will own 27% of the new entity, while the CP Group, a Thai agri-industrial conglomerate, and China Mobile, both of which own equity in True, will possess 29% and 10% of the new entity, respectively.

The government of Thailand and its CSPs are dedicated to integrating and deploying 5G across the country, evident by the steady 5G subscriber growth across the three CSPs despite the decline in ARPU. Thai CSPs have been looking into novel applications of 5G, such as Augmented Reality (AR) and Virtual Reality (VR) content, both of which have gained traction due to 5G’s low latency. This has brought about partnerships whereby South Korean LG Uplus has agreed to import AR and VR content, while True has partnered with Bifrost Cloud, a cloud technology provider to support its cloud gaming deals and services.

Huawei has a prominent presence in rolling out 5G in Thailand, having established a 5G test lab and the company’s regional headquarters for Southeast Asia in the country. This is a strategic move by the company to launch 5G nationally, and especially for the Eastern Economic Corridor (EEC), an initiative that promotes industrial transformation in three Eastern provinces of Thailand to achieve a smart city for its residents. For instance, Huawei spearheaded the digital transformation of Thailand’s largest public hospital, Siriraj Hospital, to create the Association of Southeast Asian Nations’ (ASEAN) first 5G “smart hospital.” By implementing a Multi-Access Edge Computing (MEC)-based 5G private network, a hybrid cloud, and 5G + Wi-Fi solution in smart medical applications, new innovations include 5G Autonomous Guided Vehicles (AGVs) that deliver medicine and medical supplies around the hospital, in addition to a smart emergency room and ambulance that enable emergency room personnel to send real-time information between medical staff. In May of 2022, True joined the effort to supply 5G technology to other public health settings referencing the “Siriraj World Class 5G Smart Hospital” model as a starting point.

In response to the risk of being replaced as Thailand’s top wireless carrier, AIS has positioned itself as a leading investor in 5G infrastructure in the country. In July 2022, AIS announced plans to acquire fixed broadband provider Triple T Broadband (3BB) and took a 19% equity stake in the Jasmine Broadband Internet Infrastructure Fund (JASIF), in a deal worth ~US$853 million (THB32.4 billion). This will give AIS greater access to infrastructure across the country, which should help boost its nationwide population coverage that currently stands at 81%. Aside from this, AIS has partnered with telecoms equipment maker ZTE to launch a 5G center for innovation and solutions, creating opportunities for AIS to prevail in targeted 5G vertical solutions, such as smart transportation and smart cities.

Despite having the resources to build an ecosystem for 5G across Asia-Pacific, Thailand has not harnessed the full potential of 5G. Of the population of 70 million in Thailand, only a projected 10 million consumers will use 5G by the end of 2022. For CSPs looking to remain competitive, particularly AIS, the low penetration rate is representative of the amount of untapped business opportunities in the consumer 5G space that the operator could explore. Further, based on recent ABI Insights, the market momentum for 5G consumption in Thailand has been relatively lower than its neighboring countries of China (57%) and South Korea (50%). Should AIS desire to retain its competitive advantage following the merger of True and DTAC, the company should continue to be an active player in the manufacturing and industrial sector, and perhaps even explore smart hospital applications as seen in the Siriraj Hospital example. Regardless, there is immense potential for AIS to maintain its competitive edge and mitigate the threat that is True and DTAC’s newly merged entity by looking toward new and innovative revenue channels.