Telecommunication company seeks to solve regulation problems, decline in revenue
Bangkok Post
Monday, September 10, 2007
By Komsan Tortermvasana
In an attempt to address internal conflicts and declining business in the once-healthy and profitable state enterprise, TOT Plc is taking the unusual step of preparing a turnaround strategy.
The Finance Ministry, TOT's major shareholder, is awaiting the results of the plan, which was recommended by Tris Rating. The ministry had hired Tris to assess the performance of TOT after it was corporatised from a state enterprise to a public company.
Acting TOT president Kittipong Taemeyapradit said it was the first time that TOT had been told to prepare a plan on how to restore stability and value.
He said TOT senior staff were now being briefed on what the rescue plan should contain.
"We intend to submit the first qualitative plan in November, while a quantitative plan is already being submitted every three months," he said.
TOT has had to face the fact that its core revenue from voice services on its fixed network is in decline while its new businesses have not been able to replace the lost revenues, he said.
The qualitative plan had targets, he said, adding that if TOT identified what it had to do within the timeframe, it had to be achieved. "If what we fixed could not be tackled, then it would have a direct impact on the bonuses of executives and employees, and the status of the organisation might be downgraded."
However, he added that external factors including regulation and, most notably, politics, were harder to control and had affected TOT's fortunes as well.
Mr Kittipong said he was not sure whether TOT would have to enter rehabilitation if its plan fails. "But this is a signal that we can't stay put but have to struggle to restore our business stability."
A telecom industry source said the mere suggestion of a turnaround plan was worrisome because it signalled that the state enterprise's finances are in a critical state.
If TOT could not achieve what it specified in the plan, then its management independence would be at risk and the ministry would intervene directly and order rehabilitation.
TOT was corporatised in July 2002 to prepare for open competition and a stock market listing, which has since been postponed indefinitely. But five years on, it has underperformed the booming local telecom sector. Revenues fell for three consecutive years after the change from state enterprise to public company.
In 2004, TOT earned 76.9 billion baht with 11.42 billion baht in profit. But in 2005, its revenues and profits fell to 76 billion and 6.7 billion baht. In 2006, revenue was 75.76 billion baht while profits improved slightly to 6.98 billion baht. This year, TOT's first-half revenues fell sharply to 25.94 billion baht with 2.8 billion baht in profit.
The source said that the excise tax on telecom services introduced by the Thaksin Shinawatra government had cut revenues. Although the tax was abolished following the coup last year, TOT maintains a bloated staff 19,000, which costs about 20 billion baht a year, excluding the yearly licensing fee TOT pays to the National Telecommunications Commission.
Uncertainty also remains over 20 billion baht in unpaid access charges from DTAC and True Move. Both mobile operators stopped paying access charges in November of last year and the issue is likely to go before the courts.
TOT is also appealing against an arbitration ruling that it pay True Move 14 billion baht for unfair practices in an earlier dispute.
Date Posted: 9/10/2007
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