Dtac-True mega merger spells uncertain future for Thai telco sector

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As Dtac and True, Thailand’s second and third-largest telcos respectively, plan to merge to form the nation’s largest telecommunications company, experts say that the move could negatively affect competition, innovation, and foreign ownership.

The Dtac-True mega merger is expected to create a telco giant with a market share of about 52%, putting it ahead of AIS, which currently has a market share of 47%. However, there are concerns that the consolidation could lead to a slowdown in telco innovation and reduced competitiveness.

“Low competition could tempt AIS to raise its service rates. The sector is currently a quasi-monopoly. The proposed merger of True and Dtac will lead to even higher market concentration and substantially reduce market competitiveness,” said Somkiat Tangkitvanich, president of the Thailand Development Research Institute (TDRI).

With only two telco players in the market, there is a risk that the investment into and rollout of new technology will slow down. In the Philippines, the entry of third telco DITO has been welcomed by regulators, analysts, and consumers alike. Oxford Business Group anticipates that this development, which breaks the Smart-Globe duopoly, will help “increase coverage rates, improve mobile internet speeds and offer more attractive packages.”

James Guild, an analyst based in Southeast Asia, said that regulators will also likely be hesitant about the idea of a merger that will result in a 50% market share with substantial European and Chinese ownership.

“These kinds of foreign ownership structures are common (Singapore’s Singtel has a major stake in AIS) and can be useful for transmitting technology and skills in high-tech industries like telecommunications. But given the new entity’s sheer market power, the role of these foreign companies is going to come under some scrutiny,” he said.

Others are optimistic about the merger’s benefits for innovation. According to Glen Cardoza, an analyst at Counterpoint Research, all operators are likely to increase their efforts to capture any unsubscribed remainder in the country, particularly in Tier 3 and 4 regions.

However, Cardoza warns that the merger might be negatively affected by inconsistencies in network quality, clear signals and 5G.

“Any inconsistencies in these upcoming trends might not go in favour of Dtac and True. But AIS stands to gain here. Therefore, it is possible to see a certain proportion of subscribers shifting from True and Dtac to AIS. Within those switching operators, an uptick in 5G subscriptions is possible as a fallout,” he said.

Amid these perspectives, the Dtac-True merger is seen as a natural progression for the Thai telco market, which is currently dominated by AIS. With AIS enjoying a more than 40% market share, it has been difficult for smaller telcos such as Dtac and True to make a significant impact. By coming together, Dtac and True hope to create a stronger rival to AIS and better compete in the race for 5G supremacy.

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