Academics and politicians alike slammed telecom regulators Tuesday for essentially gifting new licences to the private sector at taxpayer expense.
Tuesday's 3G auction by the National Broadcasting and Telecommunications Commission (NBTC) saw all three mobile operators awarded spectrum in an auction criticised as uncompetitive and underpriced. The sale fetched 41.625 billion baht overall, only 1.125 billion or 2.78% above the reserve price.
The three bidders, all representing units of mobile operators Advanced Info Service (AIS), Dtac and TrueMove, each won their maximum quota of 15MHz of spectrum in seven rounds of bidding that were completed in six hours. Only three of the nine slots auctioned attracted competition, with six slots, representing 5MHz each, selling at the minimum reserve price of 4.5 billion baht.
Green Politics group leader Suriyasai Katasila, who last week sought a court injunction against the auction, blasted the results.
"It's the most ridiculous auction in the world," he said, adding that the operators will pay less for 3G than what they now pay the state each year through their current concessions.
"Six licences were given out free to the private sector, correct? And three licences saw bids only to create the illusion of competition," he said.
Mr Suriyasai said Green Politics would wait until the NBTC certifies the auction results, due within three days, before deciding its next move.
Settapong Malisuwan, chairman of NBTC's telecom committee, said the auction was not aimed at generating the highest bids, but rather to allocate bandwidth to the private sector to support the modernisation of the Thai telecommunications sector.
He acknowledged that the regulator would likely face heavy criticism in the days ahead.
"We expect and are ready for some harsh criticism," Col Settapong said.
Somkiat Tangkitvanich, president of the Thailand Development Research Institute, said the regulator holds clear responsibility for the low prices received.
The total loss for taxpayers is over 16.3 billion baht, based on price recommendations made by Chulalongkorn University economists hired by the NBTC to consider benchmark prices.
"I call on the NBTC to explain to the public how will it take responsibility for the damage. I also urge relevant agencies to investigate the matter further," Mr Somkiat said.
The revenue shortfall to the NBTC and the state is a boon for the three private operators, who essentially have received their 15-year licences for a pittance, he added.
"Each operator ends up paying less than one billion baht a year for the licenses, which is very cheap. It will not benefit consumers. It will only help the operators' bottom line," Mr Somkiat said.
"There were two disastrous mistakes in the auction design. First, allowing each bidder to bid for an equal amount of maximum bandwidth did not encourage competition. Second, setting the reserve price lower than the real value of the licences was highly damaging once competition was less than it should have been."
Paiboon Amornpinyokeat, a technology expert and partner with the P&P Law firm, said the auction price may be the cheapest in the world for a 3G licence over the past 15 years.
He said it was highly possible that the Administrative Court may review the petition filed by Mr Suriyasai and the Green Politics group challenging the auction as uncompetitive.
Mr Paiboon suggested that Mr Suriyasai refile his petition about potential misconduct, adding that the court has full authority to void the auction results if wrongdoing is found.
But any action against the NBTC auction should occur within the 90-day timeframe before the results are formally certified, and certainly before actual 3G services are rolled out to limit the impact on consumers.
"The NBTC needs to clarify why it decided to use a simultaneous ascending auction system, which clearly didn't stimulate price competition as the number of bidders equalled the number of licensees," Mr Paiboon said, adding that the regulator also should clarify why the reserve price was set below that recommended by experts commissioned by the NBTC itself.
He noted that in Europe, sealed bids were more common in cases where the number of competitors was low.
Prawit Leesathapornwongsa, a NBTC commissioner who had opposed the auction design, said the state ultimately was the loser in the auction and warned that competition laws may have been violated.
"The outcome was as bad as I had feared. I think the Green Politics group will probably move next to the National Anti-Corruption Commission," he said.
"The [NBTC] commissioners who voted in the majority for the auction must take responsibility."
Dr Prawit said the NBTC would most certainly exercise greater caution in the future when additional bandwidth is offered for sale.
Jesada Sivaraks, secretary of the NBTC vice-chairman, said the auction results would be used to set a benchmark for the upcoming auction of frequency in the 1800MHz band.
TrueMove now uses 12.5MHz of frequency in the band under its 2G concession set to expire in September 2013.
Dr Somkiat from the TDRI said the NBTC needs to adjust the structure of the auction, and suggested scrapping the current 49% foreign shareholding limit to encourage foreign operators to enter the telecom sector.
AIS, through subsidiary Advanced Data Network, paid the highest price at 14.625 billion baht, and was given first choice and selected the frequency band from 2140-2155MHz. Dtac and True both offered the same final bid at 13.5 billion baht, resulting in a random draw won by True, which selected the band from 2125-2140 MHz. Dtac was awarded the final band at 2110-2125 MHz.