By policy corruption, I mean any act of government instituted for the benefit of private corporations connected to high officials of the government. Such policy corruption allows a select private operator to gain an undue edge over competitors. Such action may look like a normal busi¬ness negotiation between state and pri¬vate operators, but the corrosive effect of policy corruption is much worse than the usual variety of corruption.

Any gains made by listed companies were always going to be multiplied in value by the P/E ratio, which normally ranges from 10 to 15 times earnings in any given annual period. Of course, this gain, when translated to a share price, will also be largely taxfree. It thus makes logical sense for the AEC to focus on benefits received through listed companies related to the families of those in power, to assess whether the value created was in any way a result of "policy corruption".

There has been heated debate on a long list of policy decisions, specifically related to Shin Corp, that appear to be both arbitrary as well as directly benefit¬ing the company's subsidiaries - all con¬tributing to the Bt73 billion in proceeds received by the Shinawatra family in its recent sale of shares. It would be logical to concentrate first on the benefits received by the largest subsidiary, Advance Information Services (AIS) as a result of policy.

AIS gained its con¬cession (to 2015) from TOT Corp (TOT) while other operators, DTAC and True, received their concessions from CAT Telecom (CAT). It is an established fact that from the start AIS's concession terms were much more favourable than those granted to the other operators. Thailand passed a telecom law in October 2001, six months after PM Thaksin took office. A key provision of that law is that all opera¬tors are to be treated equally and fairly. This was new in this industry. As it turned out, the spirit of fair competition was never adhered to by former prime minis¬ter Thaksin. The relationship between AIS and the granter of its concessions, TOT, has always been a cosy one. However, it is the amendment to its rev¬enuesharing structure in 2001 that has had the greatest impact on the value of AIS and to the detriment of payment received by TOT, and, by extension, rev¬enue that goes into the state coffers.

It was around 2001 that prepaid serv¬ices began to grow, and today 90 per cent of the industry's total of 30 million cus¬tomers use prepaid service. In 2005 alone, AIS had revenue of Bt80 billion, of which 64 per cent, or Bt52 billion, derived from prepaid customers. AIS had always had an advantage over its competitors, paying a revenue share of 20 per cent to TOT, while DTAC has to pay an initial flat Bt200 "access charge" to TOT before pay¬ing an additional 20 per cent of the rest of the revenue to CAT, their concession granter. The charge to TOT was later amended to only 18 per cent of prepaid card sales, so the payment for DTAC to both state authorities totalled 38 per cent of revenue each month. TA Orange (True Mobile), which came later, also assumed the same payment structure as DTAC for its prepaid services.

The difference in net revenue is huge. Average revenue per user (ARPU) in 2001, and also today, is around Bt350 per month for all firms. This means that for each user, AIS pays Bt70 to TOT, while DTAC and True each pay a total of Bt120 to TOT and CAT. That is a Bt50 difference between providers of exactly the same services and products paid to the state per customer per month.

This is the existing structure, a result of business negotiations. The concession fee reflects the fact that AIS got into the mar¬ket first and was able to get a concession from TOT, while the others had to get concessions from CAT and pay an access charge to TOT. Originally it was intended that the playing field would level out a bit, as AIS faced a gradual increase in revenue share from 20 per cent to 25 per cent and finally to 30 per cent as stipulated in the concession agreement.

In spite of the clear advantage, AIS was able to negotiate a change in its revenuesharing agreement with TOT so that it paid a fixed 20 per cent of revenues for the remainder of the concession period on prepaid services, as opposed to facing the increase to 25 per cent and then 30 per cent. It was never known why TOT deemed it necessary or beneficial to favour AIS in this manner. What is known, however, is that, to date, it has resulted in a revenue loss to TOT of around Bt13 billion. Future losses will be even worse as the revenue share was due to be stepped up to 30 per cent from October 2005. A conservative estimate indicates that future loss of revenue, to the end of the concession, will be to the tune of Bt70.5 billion. Anything lost by TOT is the same amount gained by AIS, multiplied by the P/E ratio the mar¬ket is willing to give based on AIS's current revenue.

AIS and TOT may claim that at the time the concession was amend¬ed, TOT also amended the access charge for CAT concessionaires from a fixed Bt200 per user to a rate of 18 per cent - but even after this attempt to level the playing field, AIS still had a huge advantage over its competitors. There was thus no justifi¬cation for AIS's revenue share to change at all. After all post contractual amend¬ments, the average revenue share for AIS for post and prepaid services was around 22.5 per cent compared to 38 per cent for its competitors. Fair treatment? Hardly.

Thus, the AEC should be able to estab¬lish policy corruption based on this case. It should be able to use its powers to request negotiation documents and sub¬poena all officials from the state as well as the negotiation party from AIS to give evi¬dence. This case is within the jurisdiction of the AEC as alleged damage to the state might have been done. Should the exPM be found to have used his position for the gain of AIS, it would then make sense to consider seizing Bt17 billion from the Shinawatra family as compensation for damage to the state. Further punitive damage may also be assessed as well. The AEC, in consultation with the NTC, should then ask the question of whether it should reverse the amendment in order to ensure that the state, through TOT, does not lose the additional Bt70.5 billion in estimated revenue between now and the end of the concession in 2015.

The timing of this evaluation is also critical as it has been widely reported that Temasek is considering the potential divestiture of its stake above 49 per cent in Shin Corp. Given that AIS represents over 90 per cent of Shin Corp's value, any move towards correcting the revenue share structure should be considered in an expedient and transparent manner.

Korn Chatikavanij is deputy secretary general of the Democrat Party.

 Korn Chatikavanij