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Thailand: Notification Restricting Foreign Takeovers of Telecom Businesses

(Oct. 5, 2011) Thailand's acting National Broadcasting and Telecommunications Commission (NBTC) published a notification on August 30, 2011, in the ROYAL THAI GOVERNMENT GAZETTE, that restricts “foreign domination” of the country's telecommunications businesses. According to a Baker & McKenzie note on the measure, “[i]t is one of the most controversial notifications to come from the National Telecommunications Commission (NTC), which later became the Acting NBTC.” (Dhiraphol Suwanprateep & Pattarakorn Tangkaravakun, Thailand – NBTC Notification Restricts Telecommunications Business Takeovers by Foreigners, Baker & McKenzie LEGALBYTES (Oct. 2011).) Another commentator states that the notification “goes far beyond the restrictions found in Thailand's already expansive Foreign Business Act … .” (Douglas Mancill, NBTC Notification Restricting “Foreign Domination” – Some Context, THAI LAW & POLICY (Sept. 3, 2011).)

Applicable to current licensees as well as to all applicants for telecommunications licenses, the notification sets out rules for the licensees' handling of telecommunications services provided over their own networks. Most notably, in an attachment, it lists prohibited acts of “foreign domination,” that is, takeovers through:

1. direct or indirect share holding by foreigners or foreigners' agents;

2. use of apparent agents (nominees);

3. holding of shares with special voting rights;

4. participating in appointing or having control over the board of directors or senior officers of the licensee;

5. a financial relationship such as having a corporate guarantee or a loan with a lower-than-market interest rate;

6. licensing or franchising;

7. management or procurement contracts;

8. joint investments (by a licensee and foreigners);

9. transactions involving transfer pricing; and

10. any other behavior which provides direct or indirect control to a foreigner over a licensee. (Id.)

The notification also requires licensees and applicants to submit an annual report to the NBTC, along with other information. The report is to indicate the level of foreign control within the given company. Should the NBTC suspect a violation of the rules, the applicant or licensee must provide additional information; if the NBTC finds that there has in fact been a breach, the offender must rectify it within a prescribed time period or face possible refusal or revocation of the license. (Suwanprateep & Tangkaravakun, supra.)