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Five virtual operators to provide TOT 3G services

A mobile price war might take a new twist now that the 3G mobile virtual network operator (MVNO) service is set to be commercially launched in Bangkok in the first week of December by five prospective operators. Prices for the new low-cost voice and data service are expected to be 10 times lower than those of the existing 2G mobile services, thanks to its higher bandwidth utilisation, according to a prospective MVNO operator.

A mobile virtual network operator is an operator that does not have its own spectrum and usually does not have its own network infrastructure. Instead, MVNOs have business arrangements with traditional mobile operators to buy minutes of use for sale to their own customers.

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A mobile price war might take a new twist now that the 3G mobile virtual network operator (MVNO) service is set to be commercially launched in Bangkok in the first week of December by five prospective operators.

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The five service providers, Loxley Plc, Samart I-Mobile Plc, 365 Communication, IEC International and M Consultant Corporation, are likely to be endorsed by TOT Plc to start providing the MVNO service along with the state telecom enterprise’s 3G services in Bangkok on Dec 3.

However, only Samart I-Mobile has obtained an MVNO licence from the National Telecommunications Commission (NTC).

Prices for the new low-cost voice and data service are expected to be 10 times lower than those of the existing 2G mobile services, thanks to its higher bandwidth utilisation, according to a prospective MVNO operator.

A mobile virtual network operator is an operator that does not have its own spectrum and usually does not have its own network infrastructure. Instead, MVNOs have business arrangements with traditional mobile operators to buy minutes of use for sale to their own customers.

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Five to provide TOT 3G services

However, significant downside risks remain should political instability resurface in Thailand and the global decline proved more protracted or steeper than now expected

Inflation has been easing with the slowdown in economic activity and the decline in oil and food prices. After peaking at 9.3 percent in July 2008, 12-month inflation fell to only 0.4 percent in December, although the average for 2009 at 5.5 percent was roughly double the level in 2007. Core inflation averaged 2.3 percent in 2008, within the central bank’s target of 0-3.5 percent. In January and February, prices declined 0.3 percent from the first two months of 2008, but this has been driven primarily by fuel prices, with other prices still increasing year-on-year. Given the increased excess capacity in the economy and the continuing decline in global oil and food prices this year, inflation in 2009 is expected to be negligible.

Ready for 3G, but Thailand is not

So far, the Thai government has enough capacity to finance the first economic stimulus package and the three-year public investment plan. In the face of shrinking revenues, the government estimates its budget deficit to be about 525 billion baht, or 6 percent of Thailand’s gross domestic product, in the fiscal year ending September 2009. It is also seeking loans from domestic and external sources to shore up the budget and support planned investment.

However, the World Bank cautioned that, for public debt to remain manageable, budget deficits will need to be reduced over the next few years and growth needs to return its long-term average, highlighting the importance of using the crisis as an opportunity to enhance growth prospects.

On the demand side, private consumption and investment declined notably in the last quarter, despite falling inflation during the second half of the year in line with lower oil prices. Both export and import expanded satisfactorily during the first three quarters. However, during the last quarter, export contracted following trading partners’ economic slowdown while import decelerated markedly in line with export and domestic demand conditions. The political unrest in the last quarter of 2008 will continue to dampen tourist confidence into at least the first half of 2009. In addition, the slow down in growth of the economies from which a large number of tourists come to Thailand, such as EU and Japan, will reduce tourist receipts next year. With the slow down in exports capacity utilization is expected to fall; which will negatively affect private investment.Household consumption growth will also continue to be dampened as income growth will be slower next year with employment increasing minimally, and consumer confidence falling, even though inflation will be significant lower at only around 2 percent compared to 6 percent this year. Significant downside risks remain to the growth projection should political instability heighten, the global economy decelerate faster than projected, and implementation of the fiscal stimulus is delayed.

Manufacturing Production Index in Thailand (preliminary) posted a historical contraction of 18.8 percent year-on-year (yoy), compared to a contraction of 14.9 percent (yoy) in May 1998. A notable decline in both domestic and external demand resulted in the contraction in most categories including electronics, electrical appliances, vehicle, and iron products.

A large share of loans in 2008 was for working capital as the cost of raw materials and fuel increased significantly in the first half of the year.Next year, loans will be more scrutinized for credit quality. Large corporations will increasingly turn to domestic borrowing as the cost of off-shore borrowing increases rapidly. Bank loans to large corporations will therefore to continue to expand, as their credit quality is generally high, but those to small and medium enterprises (SMEs) may not.

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