The Economic Benefits from Investment in Advanced Mobile Infrastructure and Services: The case of Thailand

1. The Economic Benefits from Investment in Advanced Mobile Infrastructure and Services: The case of Thailand Presentation by: Ali Shah 08 MBA 03 Mohd Asim 08 MBA 20 Aslam Khan 08 MBA 21 Naved Ahmad 08 MBA 25 Tajdar Nazim 08 MBA 49 Dr H S Sai 08 MBA 11

2. CONTENTS OF THE PRESENTATION Brief overview of the case Mobile and Fixed Telecom markets in Thailand Summary of Benefit Quantification Total Economic Return and the Investment Multiplier Societal Cost of Delays in Deployment Conclusion of the Case Learnings from the Case

3. OVERVIEW OF THE CASE The current case discusses the economic benefits that can be reasonably expected to materialize from investment in “Advanced Mobile Network Infrastructure in Thailand” The above term is seen in synonymy with widely know technology such as 3G and beyond Another add-on advantage is the societal benefits arising out of such an investment

4. A PRACTICAL FORECAST • It is mentioned in the case that : “AN ANNUAL INVESTMENT OF $1 BILLION IN NEW NETWORKS BY THE ENTIRE INDUSTRY OVER THE FIVE YEAR PERIOD BETWEEN 2010-2014 WILL YIELD AN INCREASE IN GDP THAT HAS A NET PRESENT VALUE OF $8.9 BILLION”

5. BMI FORECASTS 2009 AND 2006 Source: BMI reports,2006 and 2009

6. MOBILE AND TELECOMM MARKETS IN THAILAND The most interesting feature of the Thai Mobile Market in comparable Asian nations is the discrepancy between the Fixed-line and Mobile penetration rates Mobile diffusion has significantly outstripped Fixed-line diffusion indicating the dynamism of Thai Mobile market

7. FIXED AND MOBILE TELECOM PENETRATION RATES – Yr 2006 Lines per 100 Inhabitants Source: ITU World Telecommunications Indicators, 2008

8. MOBILE SUBSCRIBER GROWTH -Thailand, UK and Malaysia Mobile Subs per 100 Inhabitants Source: ITU World Telecommunications Indicators, 2008

9. MOBILE AND TELECOMM MARKETS IN THAILAND Thai users are seeking to use internet extensively but due to the sluggish deployment of Fixed-line broadband forcing a significant portion of the Thai users to use Public access points such as internet café’s or libraries The study highlights the strong demand of atleast basic internet services and more

10. INTERNET USERS AND BROADBAND SUBSCRIBERS Users per 100 Inhabitants Source: BMI Thailand Telecommunications Report, Q3-2009, Pg.20

11. BUSINESS USE OF KEY TECHNOLOGIES Source: Diana Korka, UNCTAD, 2008

12. SUMMARY OF BENEFITS QUANTIFICATION Two major benefits were highlighted in the case: • CONSUMER BENEFITS • ECONOMY WIDE BENEFITS

13. CONSUMER BENEFITS Under reasonable assumptions the Annual Consumer Benefit from the introduction of 3G Services in Thailand will exceed US$1 Billion per year by 2014. Introduction of the offering called ”New Good”-An integrated Voice and Data/Internet Service with added benefit of mobility Second benefit comes from the types of services enabled by 3G mobile broadband as these services combine mobility, voice and broadband which has a high impact in the developing world A new concept is discussed in the case which is called “Compensating Variation”-A part of a branch of Economics (Consumer Theory) that has well established methods for translating concepts “Utility” or “Welfare” into well defined “Money Metric terms”

14. ECONOMY WIDE BENEFITS • The debate on the Economic Value of the Telecommunications Infrastructure has concentrated on the benefits from this sector to the wider economy. Benefits include: • Conventional “Multiplier” Effect • A Dynamic effect of Productivity

15. SUMMARY OF ECONOMIC BENEFITS AND COST CALCULATIONS Note: For the consumer benefit calculation, ”average” refers to the average value across all scenarios.

16. KEY IMPACTS FROM INCREASED BROADBAND/3G PENETRATION

17. JOB CREATION AND EMPLOYMENT IMPACT

18. TOTAL ECONOMIC RETURN AND THE “INVESTMENT MULTIPLIER” It is widely agreed that investment in Telecommunications Infrastructure has widespread societal benefits. M/sRoeller and Waverman(2001)* examined the effect of Fixed-line telecommunications infrastructure on GDP in the OECD Areas, and concluded that growth in GDP could be attributed directly and indirectly to the expansion of Fixed-line telecommunications * ROELLER,LARS-HENDRIK AND LEONARD WAVERMAN, “Telecommunications Infrastructure and Economic Development: A Simultaneous Approach”, American Economic Review, September 2001, pp.909-923

19. INVESTMENT MULTIPLIER Basic concept behind the “Total Economic Return” Multiplier is that an increase in the availability of valuable Telecommunications Infrastructure has long lasting impact on economic productivity and growth. The computation is based on the NPV for an investment made today and the multiplier of the same.

20. BENEFITS DERIVED FROM TELECOMS INVESTMENT • Two types of benefits: • Static Effects • Dynamic Effects • Static Effects include: • Job creation and Expanded Output (GDP) • “Indirect” Effects on the aggregate economy created by increased purchase by Telecomm sector from other sectors. This is “Multiplier” or “Ripple” effect increasing final expenditure in aggregate economy

21. BENEFITS DERIVED FROM TELECOMS INVESTMENT • Dynamic Effects include: • Increased productivity and Cost Savings in sectors that use Telecommunications (Use of mobile service in a fishing region of Kerala,India) • Creation of Services and content that would not have existed without Telecomm investment (application ranging from Adobe Flash Player to Mobile gaming software) • Potential social benefits such as reduction in travel time, environmental savings. • Intangible benefits such as improved aspiration and mobility within societies

22. CALCULATION OF TOTAL ECONOMIC RETURN USING MULTIPLIER METHOD (All monetary amounts are in US Dollars)

23. SOCIETAL COST OF DELAYS IN DEPLOYMENT • The Case highlights significant societal cost due to the delays in deployment of 3G Services in Thailand. Broadly the “Lost Consumer Benefit” has two dimensions: • The benefit foregone between 2007-2009 by the consumers who would have used the service at that time but was unavailable • Under the “Delayed Adoption” scenario penetration might be lower that would have been if services were launched in 2007

26. SUMMARY ON DELAY It may have been viable to introduce the 3G Services in Thailand in 2007. But the actual introduction of services ahs been delayed significantly. This delay has been socially costly. Over the relevant period 2007-09, 3G technology has matured significantly in other countries Significant demand for Broadband internet services, content developers, Hardware vendors would have been created. Impact of unnecessary regulatory-imposed policy delays

27. CONCLUSIONS The upcoming 2100 MHz Spectrum license offers Thailand significant opportunity to encourage further investment in the mobile telecommunications sector Opportunity for successful bidders to go off the BOT (Build-Operate-Transfer) regime Resolves long standing uncertainties that have played a part in the hesitant and at minimal levels of 3G deployment Continued investment in advanced mobile telecommunications which is in the country’s vital interest.

28. LEARNINGS FROM THE CASE Importance of investment in advanced telecomm technologies in developing countries like Thailand Insights into the concept of Total Economic Return using multiplier method Compensating Variation method for translating the relatively abstract economic concepts into money metric terms Evidence on the Social Returns to telecomm investment