An analysis of switching behavior in the Thai cellular market

Pratompong Srinuan, Mohammad Tsani Annafari and Erik Bohlin

Pratompong Srinuan, Mohammad Tsani Annafari, and Erik Bohlin are all based at the Department of Technology Management & Economics, Chalmers University of Technology, Gothenburg, Sweden.

Abstract Purpose The purpose of this paper is to explain the determinant factors of switching behavior in the Thai cellular market before the Mobile Number Portability (MNP) policy is implemented. Design/methodology/approach A binary logit model and individual survey data from the National Telecommunications Commission 2009 are used to estimate the intention of mobile phone consumers to switch. Findings The results show that subscriber characteristics, including age, government ofcer, self-employed, internet use, central region, and southern region, are signicant in explaining the switching behavior of Thai mobile subscribers. They also indicate that the mobile operators customers are confronted with different switching costs. The subscribers of the largest mobile operator have the highest switching costs. This study also shows that the largest mobile operators will gain more switching subscribers than smaller operators. The implementation of MNP will help to lower the switching costs of smaller mobile operators rather than of larger operators, as the subscribers of smaller operators are more likely to switch and move to larger mobile operators, as the larger operators provide better quality network coverage. The study shows that the expected impact of implementing MNP without national mobile roaming regulations would be worse for smaller mobile operators. The smaller operators need to compete on both price and quality improvement. In the short run, it would not be possible for the smaller operators to compete with the larger operators due to the inequality in the quality of network coverage. Originality/value The result is useful to developing countries considering implementing MNP regulation. Keywords Switching costs, Mobile number portability, Roaming network, Willingness to pay, Thailand, Mobile networks, Mobile communication systems Paper type Research paper

The authors would like to acknowledge the data support from the National Telecommunications Commission of Thailand and Thammasat University for conducting the survey. They would also like to thank the participants at the ITS2010 Conference and CPRSouth5, especially Professor Rohan Samarajiva, Assistant Profesor Susan Klien, and Professor Myeong-Cheol Park, for their helpful comments. An earlier version of this paper was presented at the ITS2010 18th Biennial Conference Culture, Communication and the Cutting Edge of Technology held at Waseda University on June 27-30, 2010, and the CPRSouth5 conference Convergence: Infrastructure, Services, Policies that was held at the Xian University of Post and Telecommunication (XUPT) in Xian on December 6-8, 2010. Received: 16 September 2010 Revised: 5 January 2011 10 January 2011 Accepted: 19 January 2011

1. Introduction
Mobile communications services have been implemented in Thailand since the 1990s. The average growth of adoption of mobile subscribers (42 percent) was high in Thailand during the last two decades, except in 1998 due to the Asian nancial crisis (see Figure 1). At the end of 2009, the mobile penetration rate in Thailand was reported by the telecom regulator (National Telecommunications Commission, NTC) as 102 percent. This gure suggests that market saturation has been reached in the Thai mobile communications market, like in many other countries (e.g. Singapore and most of the European countries). Potential mobile subscribers have been captured by the mobile operators. Competition in the Thai mobile communications market would be expected to be erce to retain own mobile subscribers as well as stealing rivals mobile customers. In other words, the competition in this market has shifted from acquiring new subscribers to retaining existing customers and luring away customers from rival operators. The structure of Thailands mobile communications market is oligopolistic. There are three main mobile network operators with mostly mobile subscribers. All the mobile operators

DOI 10.1108/14636691111146154

VOL. 13 NO. 4 2011, pp. 61-74, Q Emerald Group Publishing Limited, ISSN 1463-6697

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Figure 1 Mobile subscribers and its growth rate

focus on price strategy to compete with each other, though there is inequality in their service development, in particular their network coverage. For example, the larger mobile operators have expanded their network coverage to almost 90 percent of the population, while the smaller mobile operators have developed their network coverage to just the urban area of each province. In terms of regulations, the telecom regulator, NTC, was established in late 2004. Many regulations therefore need to be set up to stimulate competition in the mobile communications market. The implementation of Mobile Number Portability (MNP) has been a recent, debatable regulation in Thailand. There are two reasons for implementing MNP. The rst is to reduce consumer switching costs. The MNP regulation gives mobile subscribers the right to continue using the same mobile telephone number when changing mobile operator. The other reason is to increase competition in the mobile communications market. MNP will allow mobile operators to compete on both price and quality of services. The MNP regulation will be implemented in Thailand, however, where there is inequality in network coverage. Hence, it is interesting to study the determinants of the switching intentions of mobile subscribers if the telecom regulator does not implement MNP in this market. It is also worth investigating which mobile operator would gain the greatest benet from MNP regulation. This study also proposes an average MNP fee that mobile subscriber would be willing to pay. The results of this study offer suggestions for mobile operators and the telecom regulator. Mobile operators need to improve their network coverage and call qualities. The telecom regulator needs to implement a national roaming regulation that gives mobile subscribers of smaller operators the opportunity to access mobile services as mobile subscribers of a larger mobile operator. In other words, the subscribers of smaller operators could have the same network coverage or quality of service as the largest operators customers have. The rest of the paper is organized as follows. Section 2 explains relevant literature, and Section 3 describes an overview of the Thai mobile communications market. Data source and econometrics models are shown in Section 4. Section 5 interprets the results, including a discussion. The conclusions and policy implications are summarized in Section 6.

2. Literature review
Several academic research ndings are associated with the determinants of subscriber churn in mobile communications. Kim and Yoon (2004) examined the determinants of mobile

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subscriber churn and customer loyalty in Korea. Their results show that the level of satisfaction with alternative specic service attributes, including call quality, handset type, and brand image, affects customer loyalty. They investigated, in a similar way to that of the study by Kim et al. (2004), how customer satisfaction with mobile services and switching barriers inuence customer loyalty in the Korean mobile market. The results reveal that service quality, including call quality, value-added services, and customer support, appears to enhance customer loyalty. Switching barriers, i.e. loss cost, move-in cost, and interpersonal relationships, also inuence customer loyalty. Recent literature also tries to nd other factors determining the attractiveness of mobile operators. Kim and Kwon (2003) conducted a conditional logit analysis based on a consumer survey. Their analysis reveals that consumers in the Korean mobile telephone market prefer operators with a large number of subscribers. The results indicate that the size of the network increases the attractiveness of mobile operators. Fu (2004) reports similar results: size of network and termination-based price discrimination play an important role in subscriber attractiveness in the Taiwanese mobile market. Similarly, the study in Italy by Corrocher and Zirulia (2009) shows the importance of local network effects and consumer decisions. The results suggest that there is a high probability of consumers choosing the same operators as their friends/family members. Based on previous studies, the determinant factors of subscriber churn and attractiveness of mobile operators are service quality of mobile services, subscriber characteristics, and size of network. This suggests that if mobile operators want to attract a higher number of mobile subscribers and/or retain their existing mobile customers, they need to improve the quality of their services and use their network size advantage. Mobile operators also need the mobile subscriber characteristics information to be able to capture all kinds of subscriber needs. In other words, mobile operators want to raise consumer switching costs using these determinants to keep existing mobile subscribers and to attract new ones. Switching costs are becoming a signicant problem for competition on the mobile communications market (e.g. Shy, 2002; Kim et al., 2004; Lee et al. 2006; Grzybowski, 2008; Maicas et al., 2009). The switching cost is the cost incurred when switching supplier or operator, including time, money, and psychological cost (Dick and Basu, 1994). It reects the disutility a customer experiences from switching product or service providers (Chen and Hitt, 2002). Switching costs are considered one kind of anti-competitive behavior. Most mobile operators build up switching costs in order to lock the consumer into their networks and make consumers feel that it is too difcult to change mobile provider. Klemperer (1987) explained that there are at least three types of switching costs: transaction costs, learning costs, and articial or contractual costs. National Economic Research Associates (NERA) (2003) elaborated further, however, and mentioned that consumer switching costs can be categorized into ve groups: transaction costs, search costs, learning costs, compatibility costs, and contractual costs. For instance, in the context of mobile communications, transaction costs occur when switched subscribers cannot retain their mobile numbers. It becomes costly for the subscribers, as they have to inform all their friends and colleagues of their new mobile numbers. It is even more costly for business subscribers, as they lose potential customers. Search costs are presented because consumers have to gather information about other operators. SIM locking is considered a compatibility cost. It creates a burden for mobile subscribers who want to switch to another mobile operator, as they have to buy or unlock their mobile phones to be able to use the services of other mobile operators. Contract costs usually arise for post-paid subscribers. Most mobile operators in European countries offer lower per-minute prices and handset subsidies to post-paid subscribers. The subscribers have to sign a long-term contract, usually for 24 months, to benet from the offers. If the subscribers break the contract to switch to another operator, the contract termination fee is applied. The handset subsidy is not used by mobile operators in Thailand, however, as IMEI locking and handset locking are prohibited.

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The impact of the existence of switching costs is twofold. On the one hand, switching costs are a source of market power for operators and can affect market competition in mobile communications (Buehler et al., 2006; Grzybowski, 2005, 2008; Lee et al., 2006). Mobile operators can lock in their existing customers by raising the consumer switching costs, making their own mobile customers feel it is difcult to switch to another mobile operator. On the other hand, mobile operators preempt raising consumer switching costs by using strategies to retain as many existing mobile subscribers as possible. The telecom regulator is concerned about this issue. To overcome the problem of switching costs, the telecom regulators implemented MNP as the main policy for reducing switching costs and increasing competition among rms (Buehler et al., 2006; Lee et al., 2006; Lyons, 2006; Maicas et al., 2009). The main reason for introducing MNP is that it allows mobile phone users to keep their telephone numbers when changing from one network to another. In other words, MNP reduces transaction costs for mobile subscribers. Mobile users do not need to spend time and/or money informing others of their new mobile numbers when they change mobile carrier. Several studies have recently investigated the impacts of MNP on reducing switching costs and increasing competition among rms (Buehler et al., 2006; Lee et al., 2006; Lyons, 2006; Shin and Kim, 2007; Maicas et al., 2009). At the same time, the studies by Lee et al. (2006) and Shin and Kim (2007) note that switching costs remain at a signicant level despite number portability, as mobile operators develop new subscriber lock-in strategies that make subscribers stay with current mobile operators.

3. An overview of the Thai mobile communications market

3.1 A brief history of the Thai mobile communications market Mobile communications services were introduced in Thailand in 1986 by the state-owned enterprises Telephone Organization of Thailand (TOT) and Communications Authority of Thailand (CAT). In the beginning, these state-owned enterprises provided mobile communications services based on analog technology themselves. The demand for mobile communications services grew rapidly, however, and TOT and CAT could not meet it. Thus, concessions were granted in 1990 to two private companies, i.e. Advance Info Service (AIS) and Total Access Communication (TAC), in order to provide mobile communications services to the public more efciently. These private companies were granted concessions for 25 and 27 years respectively (Rattananubal and Somboontanon, 2001). As the analog system has limited signal channels, and the restricted frequency range and growing demand for the service are not being met efciently, two private companies asked CAT and TOT for permission to introduce a digital mobile system from 1994. CAT granted other mobile concessions to the Wireless Communication Service (WCS[1]) and the Digital Phone Company (DPC[2]) to operate mobile communications services in 1996 and 1997 respectively. Later, two mobile operators, Hutch and THAI Mobile, entered the Thai mobile communications market, as shown in Figure 2. The Thai mobile communications market structure currently remains an oligopolistic market. There are ve active mobile operators with three major mobile communications service providers: AIS, DTAC, and Truemove. As shown in Figure 3, this market is concentrated, as the largest mobile operator has almost 50 percent of it. Moreover, considering the concentration ratio, CR3 (which is calculated from a summary of the market of three major operators) suggests that this mobile market needs regulations. 3.2 Mobile subscriber development and competition in the market The adoption of mobile services increased signicantly after the digital mobile system was introduced and the prepaid pricing scheme implemented in 1999 (Srinuan, 2005). As shown in Table I, the annual average growth rate of mobile subscribers in Thailand between 2000 and 2009 was about 44.9 percent. The number of mobile subscribers surpassed the number of xed-line subscribers, which has the highest growth of mobile adoption, in 2001. The

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Figure 2 Mobile operators in Thailand

Figure 3 Mobile operators market share

Table I Mobile subscribers, penetration rate, growth rate, and mobile per xed subscription
2000 Subscribers (millions) Penetration rate (%) YoY growth (%) Mobile per xed subscriber 3.06 4.90 30.63 0.55 2001 7.55 11.99 147.05 1.25 2002 10.17 15.96 34.72 1.55 2003 21.83 33.83 114.60 3.29 2004 27.38 41.94 25.43 4.02 2005 31.14 47.22 13.73 4.43 2006 40.72 61.23 30.79 5.76 2007 53.00 79.13 30.15 7.55 2008 62.00 92.01 16.98 8.83 2009 65.22 102.31 5.19 9.05

Source: ITU (2008) and National Telecommunication Commission (NTC) (2009)

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mobile penetration rate in Thailand at the end of 2009 was reported by the Thai telecom regulator, NTC, as a mobile density of 102 percent. This gure indicates that mobile operators have captured most of the potential mobile subscribers. Mobile operators can expect erce competition in this market. Competition in the Thai mobile communications market was restricted by various anti-competitive behaviors by the major operators. For example, AIS and DTAC used IMEI locking, which made the networks only accept logins by handsets sold by them, as a way of bundling overpriced handsets with calling services. The practice continued until mid-2002 when Truemove (formerly TA Orange) entered the market with a low-price handset strategy (Tangkitvanich and Ratananarumitsorn, 2002). In the same year, DTAC introduce IMEI unlocking through its handsets in order to force other mobile operators to do so (Srinuan, 2005). SMS blocking was applied to prevent new subscribers from Truemove sending short messages to AISs customers. AIS also refused to let Truemoves customers roam on its network (Tangkitvanich and Ratananarumitsorn, 2002). One of the most powerful strategies by AIS was termination-based price discrimination. AIS set prices in favor of calling within its network and against calling outside its network. These strategies were implemented by AIS to prevent existing mobile subscribers from moving to other mobile operators and to strengthen its market power. These anti-competitive behaviors have now disappeared, with the exception of termination-based price discrimination. The result is an imbalance in the trafc of the major mobile operators. The largest mobile operator in terms of market share has a smaller percentage of off-net calls than the other mobile operators (see Figure 4). This may suggest that the largest mobile operator will yield interconnection revenue rather than pay an interconnection fee to other mobile operators. Moreover, termination-based price discrimination can be a potential factor making existing mobile subscribers more likely to remain with the same mobile operator, in particular, larger mobile operators. Without intervention from the regulator, this can create a potential problem for small operators that terminate calls outside their network more than intra-network. Small operators could have a decit access charge as a result and lose prots. The National Telecommunications Commission (NTC) was established in late 2004. The NTC set up the necessary regulations, such as a licensing regime, interconnection regulation, market denition, Signicant Market Power (SMP) regulation, and so on, just as the developed countries did. The NTC has recently considered implementing a mobile number Figure 4 On-net and off-net percentage at the end of September 2009

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portability (MNP) regulation. With this regulation, the NTC aims to reduce consumer switching costs and increase the level of competition in the Thai mobile communications market. The MNP regulation has not been implemented yet, however, due to the MNP fee and the lack of an established clearing house.

4. The data and econometric model

4.1 Data The data were obtained from a survey of individuals in mid-2009 funded by the NTC. Thammasat University created the questionnaire and distributed it to the respondents by random sampling during June 2009. The survey consisted of various kinds of questions including the type of subscription, spending and usage of mobile services, the intention to switch and/or add more mobile subscriptions, knowledge of and willingness to use 3G services, etc. The questions used in this study were mostly in the current mobile usage information part, including:
B B B

mobile operators and type of subscription; intention to switch to another mobile operator; and individual characteristics such as gender, age, occupation, and income.

There were 1,805 respondents in total, but only 1,425 data items can be used for further data analysis due to incomplete responses and outlier samples. For example, the authors dropped respondents who were under the age of 15, as teenagers cannot afford mobile communication services themselves. The socio-demographic information is shown in Table II. Table II Socio-demographic information
Ratio (%) (a) Gender Male Female (b) Ages 10s 20s 30s 40s 50s 60s (c) Occupation Government Private Temporary Student Self-employed (d) Monthly income (THB) ,5,000 10,000 15,000 25,000 35,000 45,000 45,001 (f) Education Below undergraduate Undergraduate Above undergraduate

38.58 61.42 8.28 49.93 23.94 11.29 5.54 1.03 30.00 17.75 13.54 29.39 0.93 20.11 36.18 15.66 14.57 5.61 2.6 5.27 41.79 45.21 12.86

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Mobile usage and the intention to switch and add more mobile subscriptions are shown in Table III. There are two types of subscriptions in this mobile market: post-paid (30 percent) and prepaid (70 percent). This suggests that the Thai mobile communications market is dominated by prepaid subscriptions. The mobile customers belong to specic mobile operators. The market shares are 37.8 percent for AIS, 41.3 percent for DTAC, 19.7 percent for Truemove, and 1.16 percent for Hutch. These gures differ from the NTC data, which indicate that AIS is the largest mobile operator in terms of mobile subscribers, while DTAC is the second largest mobile operator (see Figure 3). Truemove and Hutch are ranked in the same positions as those reported by NTC. As this market has not yet implemented MNP, it is interesting to see the mobile subscriber switching and related behavior. The survey reports that the customers who will switch mobile operator in the next six months constitute 5.2 percent. Of the respondents, 7.25 percent considered adding more mobile subscriptions instead of switching mobile operator, the rest (87.55 percent) were not willing to change their service providers during the same period. More specically, DTAC has the highest portion intending to switch mobile operator, followed by AIS, Truemove, and Hutch (see Table III). This suggests that DTACs customers may not be satised with their prices and services. 4.2 Econometric model of subscriber switching This study employs the dichotomous decision by consumers of whether to switch mobile operator. The appropriate econometric tool is a binomial logit model based on the discrete choice theory. Discrete choice theory is the study of behavior in situations in which the individual must select from a nite set of choices. It assumes that an individual is likely to choose one alternative over others when the level of its utility is greater to him or her than the Table III Mobile usage
Ratio (%) (a) Type of subscription Post-paid Prepaid (b) Operators market share AIS DTAC Truemove Hutch (c) Intention to switch mobile operator and/or add more subscriptions in the next six months Switch Not switch Add more subscriptions (d) Intention to switch by operator AIS DTAC Truemove Hutch (e) Monthly mobile usage expense Min 0 Mean 477.5 Max 3,000 (f) Internet use via computer Do not use Use 22.71 77.29

29.89 70.11 37.8 41.3 19.7 1.2

5.2 87.55 7.25 1.85 1.98 1.23 0.14

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utility of other alternatives (Kim and Yoon, 2004). As shown below, the study applies the canonical discrete choice model, which species the probability of an individual choosing a certain alternative as a function of observed attributes of the individual and the alternatives available to him or her, and these attributes are supposed to be causal variables affecting the choice. For the subject of this paper, the set of alternatives is to switch and to remain. The factors that inuence the decision of an existing consumer on whether to switch to another mobile operator are divided into operator characteristics such as the type of subscription, mobile usage expense, and individual-specic factors (demographic characteristics) like gender, age, occupation, internet usage, region, and income. The study also considers the different subscribers decisions on different mobile operators. The level of utility that the nth subscriber obtains from either churning outbound or remaining with the current carrier can be expressed by the following indirect utility function in terms of zjn (service attributes, j [ {switch; remain}) and S n (individual-specic characteristics). U jn Uz jn ; s n j {switch; remain} 1

The indirect utility in (1) can be divided into an observed part (Vjn) and an unobserved part (ejn). U jn V jn e jn 2

The probability of the nth subscriber switching, as derived by making the level of utility from switching greater than that of remaining, can be expressed as follows: Prob switchjj ProbU switch; n . U remain; n 3

When the unobserved ejn is distributed independently and identically according to the cumulative logistic distribution, the functional relationship between the revealed utility and the likelihood of switching is binomial logit. A binomial logit model is used to relate the probability of switching from the current mobile operator to explanatory factors including mobile carrier attributes and demographic variables. The model is of the form: P jn F x jn b 4

where Pjn is the probability that the nth subscriber will switch from mobile operator j, and xjn is a vector of mobile operator attributes, subscriber socio-demographic characteristics, and mobile operators. b is the parameter vector to be estimated and F(.) is the cumulative normal distribution function. In (4), the parameters relate changes in the explanatory variables to the direction of change in the switching probability. This study relates the switching decision to the operator and the subscriber characteristics. The value of the dependent variable was set to 1 when the subscribers were going to switch their mobile operator in the next six months and to 0 for adding more subscriptions and not switching. This model aims to reveal the important variables that inuence the decisions of mobile subscribers. The study can also explain the level of switching costs of different mobile operators. The explanatory variables included in the model are listed and described briey in Table IV. The authors include dummies of mobile operators, which could explain the switching costs for the subscribers of each mobile operator. The larger mobile operators may have an advantage when it comes to making their subscribers continue to use their services. For example, AIS has the highest number of subscribers (according to the NTC statistics). Subscribers may feel that it is more convenient to stay with AIS, as they can make calls to many people in the same network. The demographic variables of age, gender, occupation, income, mobile usage expense, internet use, and region are included in the models. The authors included these variables

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Table IV Description of variables

Variable Dummy for switching (dependent variable) Operator characteristics Prepaid subscription AIS DTAC Truemove Hutch Subscriber characteristics Age Male Above undergrad Undergrad Government ofcer Private ofcer Self employ Temporary employ Income Mobile usage expense Internet use Central region North-eastern region Southern region Description 1 if the respondent has an intention to switch; Otherwise 0

1 if the 1 if the 1 if the 1 if the 1 if the

respondent is prepaid subscription; Otherwise 0 respondent is AISs customer; Otherwise 0 respondent is DTACs customer; Otherwise 0 respondent is Truemoves customer; Otherwise 0 respondent is Hutchs customer; Otherwise 0

Subscribers age 1 if the respondent is male; Otherwise 0 1 if the respondent has completed a masters degree or more; Otherwise 0 1 if the respondent has completed an undergrads degree; Otherwise 0 1 if the respondent is employed by a government agency; Otherwise 0 1 if the respondent is employed by a private company; Otherwise 0 1 if the respondent has his own business; Otherwise 0 1 if the respondent does not have a permanent job; Otherwise 0 Monthly income before tax Mobile usage spending per month 1 if the respondent uses the Internet via a PC; Otherwise 0 1 if the respondent lives in the central region; Otherwise 0 1 if the respondent lives in the north-eastern region; Otherwise 0 1 if the respondent lives in the southern region; Otherwise 0

because the demographics and income level as well as the type of occupation may inuence the decisions of mobile subscribers.

5. Estimation results and discussion

As shown in Table V, the results reveal that the probability of subscribers switching is found to be dependent on subscriber characteristic such as age, government ofcer, self-employed, internet use, central region, and southern region. The result suggests to the mobile operators that, for example, elderly subscribers have a lower probability of switching mobile operator. Government ofcers and subscribers with their own businesses are also less likely to switch mobile operator. This may suggest that this occupational group faces high switching costs. The main reason may be the lack of MNP in this market. The internet use variable provides an interesting result. It indicates that mobile subscribers who usually use the internet are less likely to switch to another mobile operator and that these mobile subscribers have all the prices and service information when they chose mobile operators. In other words, these subscribers have already chosen a suitable mobile operator. Thus, they are less likely to switch. Mobile subscribers who live in the central and southern region of Thailand have a lower probability of switching to another mobile operator. This indicates that the quality of network coverage in these regions does not differ greatly between mobile operators. Thus, mobile subscribers tend to use the current mobile operator instead of switching to another one.

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Table V Estimation results

Variable Operator characteristics Prepaid AIS DTAC Truemove Subscriber characteristics Age* Male Above undergrad Undergrad Government ofcer* Private ofcer Self-employ** Temporary employ Income Mobile usage expense Internet use** Central region* North-east region Southern region* Marginal effect Std. err. z-test p-value

0.009 20.028 20.029 20.016

0.010 0.023 0.024 0.019 0.001 0.009 0.019 0.010 0.021 0.019 0.036 0.028 0.000 0.000 0.014 0.010 0.011 0.008

0.930 21.250 21.210 20.810

0.351 0.211 0.227 0.420 0.007 0.144 0.591 0.331 0.028 0.231 0.099 0.150 0.329 0.732 0.068 0.000 0.629 0.000

20.002 0.013 0.010 0.010 0.046 0.023 0.060 0.040 0.000 0.000 20.026 20.042 0.005 20.040

22.720 1.460 0.540 0.970 2.200 1.200 1.650 1.440 20.980 0.340 21.830 24.040 0.480 25.240

Notes: *, ** signicant at the 5 percent and 10 percent level respectively

Furthermore, the estimation shows that prepaid subscribers are more likely to switch to other mobile operators. This indicates that prepaid subscribers have lower switching costs than post-paid subscribers do. In reality, prepaid subscribers can easily switch to another mobile operator by changing to a new SIM card, as the Thai telecom regulator bans handset locking. Moreover, all the mobile operators in Thailand offer prepaid SIM cards free. This variable is not statistically signicant. The estimation also shows that mobile subscribers of AIS, DTAC, and Truemove are less likely to switch to other mobile operators than subscribers of Hutch are. The results suggest that subscribers of the mobile network providers, i.e. AIS, DTAC, and Truemove, have higher switching costs than subscribers of Hutch. Nevertheless, these results do not appear statistically signicant. This study also considers the impacts of switching behavior on mobile operators and competition. The information from the survey indicates that 31.88 percent of subscribers who intend to switch will go to AIS, which is the largest mobile operator. Of these mobile subscribers, 27.53, 27.53, and 13.04 percent will go to DTAC, Truemove, and Hutch respectively. This suggest that in the next six months, a higher portion of switching mobile subscribers will change to the largest mobile operator, as AIS, the largest mobile operator, has better network coverage in most of the regions in Thailand (see Table VI).

Table VI Number of mobile base stations for each mobile operator at the end of 2009
AIS Bangkok & Metro North North-east Central East South Total 2,248 1,201 1,919 1,330 910 1,668 9,276 DTAC 2,192 1,290 1,575 1,221 1,029 1,358 8,665 Truemove 1,735 821 886 716 528 851 5,537 Hutch 386 340 290 307 245 373 1,941

Source: NTC (telephone interview Mr Pasu Srihirun)

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This problem will be more serious if the Thai telecom regulator implements MNP in the mobile communications market. The percentage switching mobile operator will increase, as mobile subscribers can keep their mobile telephone numbers when changing mobile operator if MNP is implemented. The smaller mobile operators will lose their customers if they offer a similar price but supply relatively weak network coverage. This would be the worst case for competition in the Thai mobile communications market. The telecom regulator should consider implementing necessary regulations, i.e. national roaming, in this market. This is discussed in detail in the next section. Moreover, this survey includes the question of willingness to pay an MNP fee. The average MNP fee is 85 THB per time. This gure suggests that willingness to pay for this service is less than the MNP fee that the NTC will implement. It will cost 300 THB per time. If the NTC retains this decision, MNP will be used less than it should be.

6. Conclusion and policy implications

This study examines the determinants of switching mobile subscribers in the Thai mobile communications market. The results show that subscriber characteristics, including age, government ofcer, self-employed, internet use, central region, and southern region, can explain a signicant amount of the switching behavior of Thai mobile subscribers. It also indicates that different mobiles are confronted by different levels of switching costs. The subscribers of the largest mobile operator are subjected to the highest switching costs. This study also shows that the largest mobile operators will gain more switching subscribers than the smaller operators. The implementation of MNP will help to lower the switching costs of smaller mobile operators rather than of larger operators, as the subscribers of smaller operators are more likely to switch and move to the larger mobile operators, as the larger operators provide better quality of network coverage. The study shows that the expected impact of implementing MNP without a national mobile roaming regulation would be worst for the smaller mobile operators. The smaller operators need to compete both on price and quality improvement. In the short run, it would not be possible for the smaller operators to compete with the larger operators due to the inequality in the quality of network coverage. Hence, the telecom regulator should consider implementing a national mobile network roaming regulation. This regulation would provide an opportunity for smaller mobile operators to rent the mobile network from larger mobile operators. The subscribers of smaller operators could access mobile communication services anywhere, even in places where smaller operators had no network. Thus, this regulation would provide equality of network coverage to smaller operators. They would then be able to compete with larger mobile operators. The telecom regulator should also consider the rate of roaming, as larger operators could exercise a price squeeze on the roaming price. It would be better in the long run if smaller operators could expand their network coverage by themselves or if all the smaller operators could make a joint investment in expanding network coverage. It is therefore important for competition in the mobile market to have a slight difference in the quality of services, in particular network coverage, as mobile operators currently compete with each other with just price competition. Although operators with less coverage offer a better price, it will not be attractive enough to mobile subscribers. Mobile subscribers will not prefer to pay less if they cannot make calls anywhere they want.

Notes
1. This company has formally provided mobile communications services since 2002. It was renamed TA Orange and then changed to its current name, Truemove, in 2006. 2. In February 2000, DPC merged with the Shinnawatra Group. It was a ghting band for AIS for a few years. This company does not exist in the Thai mobile communications market now.

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About the authors

Pratompong Srinuan is a PhD Candidate at Department of Technology Management & Economics, Chalmers University of Technology, Gothenburg, Sweden. His Master Degree in Economics is from Faculty of Economics, Thammasat University, Bangkok, Thailand (2005). His Bachelor Degree is also in Economics (second class honor) from Walailak University, Nakorn Si Thammarat, Thailand (2002). He has been Economist at the Policy and Regulatory Department, National Telecommunications Commission (NTC), Thailand since 2005, and is now on leave. He is interested in telecommunication policy and anti-competitive behavior. Pratompong Srinuan is the corresponding author and can be conacted at: pratompong.srinuan@chalmers.se Mohammad Tsani Annafari is a PhD student with a scholarship from the Indonesian Ministry of Communication and Information Technology. His PhD research focuses on the economic and social impact analysis of mobile telecommunication to society. As he works for the Directorate General of Customs and Excise, Ministry of Finance, Republic of Indonesia, he also has a strong research interest related to e-customs and public administration reform. Erik Bohlin is Professor and Head of the Division of Technology & Society, Department of Technology Management & Economics at Chalmers University of Technology, Gothenburg. He has published in a number of areas relating to the information society policy, strategy and management. He obtained his graduate degree in Business Administration and Economics at the Stockholm School of Economics (1987) and his PhD at Chalmers University of Technology (1995).

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