The ‘How Come’ Deal 2004-2005

A tale of two newspapers - Thaksin's son and the subway advertising contract - April 12, 2004
For once, the Bangkok Post has a lot more detail about the deal. However it omits speculation from Thai-language papers about the reason for offering the concession to Thaksin's son--so that the government will pay a good price to buy back the subway concession.

Thaksin's son gets deal from subway company - translated and summarized from Prachachat Thurakij, April 9-12, 2004
BMCL is trying to please Premier Thaksin by offering a deal to How Come Co. Ltd. (an advertising agency run by Premier Thaksin's son). This will ensure that the government will buy the concession at a very good price.

Competition for subway contract - Firm run by PM's son seeks a share - Bangkok Post, April 12, 2004
...Triads, which includes subway operator Bangkok Metro (BMCL) as a major shareholder, holds a 25-year concession to manage advertising on the subway system. Tipsuda Yimwilai, the company's chief executive officer, says ad space, available for agencies to lease since November, is now 80% fully booked, with the remaining 20% just awaiting final documentation.
But a surprise announcement over the weekend that How Come Entertainment, owned by Panthongtae Shinawatra, the only son of Prime Minister Thaksin Shinawatra, was angling to win an indoor advertising contract for the subway has thrown the plans for Triads Network into jeopardy.
Triads' sales could fall by half if How Come successfully gains a contract from Bangkok Metro. The maneuvering has also raised questions about whether a deal was struck between the government and BMCL in order to allow the new ad provider entry into the market...

Capitalists with political connections grabbing subway advertising and telecom - translated and summarized from Bangkok Biznews, April 22, 2004
How Come Advertising is grabbing all the golden areas of the subway while the private sectors yell with fury about BMCL's rule for a monopoly on telecommunication systems inside subway stations while other groups will have to pay heavy rent at 80 million baht a year. However, How Come has not signed a deal with BMCL yet.
Triad Network Co.Ltd has to cut revenues 50% (80-90 million baht) to allow How Come Co. Ltd (the advertising agency run by Mr. Phanthongthae Shinnawatra - Premier Thaksin's son) to grab prime areas inside all the stations. Furthermore, BMCL is cutting down the contract period with Traid Network from
25 years to 10 years with an extension every 5 years to please the stock buyers through the restructure before offering an IPOs.
So far Triad Network has sold 80% of the advertisable area in subway stations for consumer products, automobiles and electronics. Therefore, Traid Network has to send the message to those advertising agencies who have purchased packages from Traid to cancel the advertising package or change the advertising area to be more flexible while eliminating the 10% charge on the agencies. On the other hand, the agencies will have to contact How Come if they insist to rent the prime areas.
This causes a 50% cut in revenue since revenue sharing depends on advertising rates along with the share holding rate. Even though this change will shake the confidence of the agency, everybody will accept this fact .... while losing the right to set up advertising on plasma TVs or printing advertising tabloid like VGI global has did at Skytrain stations. The company will focus on MRTA PR and the outdoor advertising instead.
Triad Network is a joint venture between BMCL and the Yimwilai family (Triple A Co.Ltd.) with a share holding ratio of 56:44 and registered capital of 3 million baht with a plan to boost capital to 20 million baht by the end of this week. MRTA will run the PR section on their own and leave Traid Network to run the advertising in some sections of the stations. Triple A also runs the advertising on four sides of Baiyoke Tower.
How Come said they have been invited by BMCL and assigned to work on the advertising on the tunnel sections.
BMCL said they have held stock in three subsidiaries relating to BMCL: Triad Network (subway advertising), Metro Mall (subway retailer), and Radianz Communication Network (basic telecom in subway), and they thought that How Come will bring more benefit than Triad network--at least 3 times the amount Traid Network offers due the the higher prices for advertising. BMCL has full right to cancel the old deal since the new deal offers much more benefit than the old one without calling a new bid since it is the joint venture with BMCL.
Even though How Come claimed that they have not signed the deal with BMCL yet, the news source said that How Come has signed a contract with BMCL on the advertising on the platform level as well as the special event area with a monthly rent of 60,000 baht in all 18 stations. The ads will be in positions opposite the screen doors. This will include ads which will be change every few seconds with light reflection creating animation--the most efficient advertising form.
Furthermore, Mr Siriwat Kajornprasart - son of Maj Gen Sanan Khajornprasat (the secretariate of Democrat Party) has grabbed the deal for the Bangkok Station free magazine for those who ride Skytrain and Subway - now in its 3rd issue. This is another form of advertising to serve 300,000-400,000 Skytrain passengers.
CP's True Telecommunication is grabbing the concession on the telecommunication installation in all 18 stations. Initially, AIS is offering the telecom deal with BMCL, but BMCL refused to let AIS handle the project since they consider True as a more viable partner since True has the experience in both conventional phones and mobile phone while AIS only has expertise in mobile phones. BMCL Board of Directors do not want those related to Shin Corp to monopolize subway deals. However, BMCL still allows other telecoms to manage fiber optic cables since MRTA just hired True to deal with system installation but not management.
The telecommunication system inside subway station is a very critical part of the subway system and it has the potential to be a money maker since ATM machines, public phones, and mobile phones must be usable even inside subway stations - thus those companies need to rent air time as well as communication cells.
Furthermore, BMCL has asked NRC (BMCL's subsidiary) to have exclusive rights to handle the antenna for telecom systems while other telecom companies need to pay 80 million baht annual rent to use both fiber optic systems and mobile phone systems which causes lots of anger from other telecom firms.
AIS has just installed only one telecom station at Thai Cultural Center Station to support the the land owned by Khunying Potjaman Shinnawatra (Premier Thaksin's wife). However AIS and DTAC are still not be able to conclude the telecom deal with BMCL since the annual lease is now at 80 million baht/year.
However the installation of the telecom system by the private sector without permission from TOT PCL and CAT PCL and the collection of monthly rent from telecom installation by MRTA/BMCL are violating the TOT Act of BE 2497(1954) and the State Enterprise capitalization Act of BE 2542 (1999) which states that TOT and CAT are the ONLY authorized agencies who can install the telecom system in Thailand unless TOT or CAT have granted a concession to the private sector to handle this job until the National Telecom Board is set up. Therefore, the telecom stations installed inside subway stations must be confiscated and transferred to TOT or CAT.

Note: Expect a court fight between BMCL (and MRTA) against TOT PCL and DTAC soon on telecom deal inside subway stations.

More on 'lucky' subway deals - April 23, 2004
The Post again has lots of detail and The Nation takes it farther by recounting all the influential persons and businesses involved in the subway. This is the kind of thing Thais ruefully refer to as 'lucky'--when well-connected people have extraordinary success in business.

Subway cake carved up - PM's son's company in talks with BMCL - Bangkok Post, April 22, 2004
Under pressure from Bangkok Metro Company Ltd (BMCL), Triads Networks Co has agreed to amend its sole advertising concession for the Bangkok subway to allow How Come Entertainment Co, a new firm led by Panthongtae Shinawatra, to offer lucrative advertising services for the new transport system. Triads and BMCL sealed the amendments just before the long Songkran holidays in a deal questioned by many as rife with political overtones.
Triads, an ad placement agency partly owned by the Yimwilai family, agreed to reduce its original 25-year concession to 10 years with a five-year renewal option. Space allocated for media placements within the subway system was also cut in half under the new contract.
How Come, formed just last November, recently announced that it was building up its business contacts including a deal to import Japanese cartoon series to be aired on Channel 3, controlled by BEC World Plc.
Mr Panthongtae, the 23-year-old only son of Prime Minister Thaksin Shinawatra, is chief executive and president of How Come, a company whose other young executives include Aiyakup Kritboonyaleai, Hana Tassanavalai and Nantasit Jamsomboon.
Aiming to become an integrated entertainment group, How Come expects revenue of up to 100 million baht this year.
...Triads had originally held sole rights to ad placements within the subway system. But under the ``agreed'' changes to the contract with BMCL, Triads will lose rights to place ads in station platforms, offer multimedia telecommunications services and event marketing.
... Industry executives expressed resignation about the changes, seemingly the result of clear political connections.
``We're now completely confused about who to deal with regarding commercial ad space. No one has ever told us what the situation is about,'' said one media buyer.
Others said the entry of How Come was not surprising, given the lack of transparency and nepotism that have characterised state contracts in the past.

Advertiser upset about Shinawatra move
- The Nation, April 22, 2004
Triads Networks Co Ltd, a joint venture between Bangkok Metro Co Ltd (BMCL) and the Yimwilai family, established to develop advertising in Bangkok’s new subway system, said yesterday it would lose 50 per cent of its business following an unexpected revision of the concession contract by BMCL this month...
How Come Co Ltd, an agency set up by Panthongtae Shinawatra, son of the prime minister, is reportedly bidding for the rights to market the 20 kilometres of trackside advertising between Bang Sue and Hua Lampong, which is expected to generate more than 20 per cent of total revenue of the entire project.

METRO DEALS: 'In crowd' line up at the subway - The Nation, April 23, 2004
Thailand's first subway system has fast become a goldmine for businesses with connections to major political parties.
A source at BMCL said that How Come Entertainment Co Ltd, an advertising agency set up by Panthongtae Shinawatra, son of the prime minister, had submitted a bid for the rights to market advertising space for the 20km of tunnels between Bang Sue and Hua Lampong.
It will also launch a new kind of advertising on tunnel walls - illuminated full-motion displays which passengers will be able to see when they look through the dark windows of moving trains, he said.
...Suriyasai Katasila, secretary of the Campaign for Popular Democracy group, yesterday questioned if such deals were "benefit sharing" among people associated with national politics.

'Deals' needs MRTA's seal - The Nation, April 24, 2004
Compared to earlier articles on this issue, this one is more sedate, attributing news about connected people involved in subway deals to 'media reports.'
No concession or subcontract work granted by the subway company can be valid without the approval of the Mass Rapid Transit Authority of Thailand (MRTA), its governor said yesterday...
Bangkok Metro Co Ltd (BMCL) had been reported as awarding jobs to telephone company True Corp and cell-phone operator Advanced Info Service to install fibre-optic cables in the subway line so mobile phones can be used underground...
So far the only deal presented to the MRTA was for Triads Network, a subsidiary of BMCL, to rent out advertising space in the stations.
"Triads' management did not guarantee a high return for us, so the MRTA asked them to revise their plan," Prapat said.
BMCL renegotiated Triads' contract this week, giving Triads less prime space in subway tunnels to sell to advertisers.
Media reports have said BMCL is planning to award the rights to another firm, while the How Come Entertainment advertising agency founded by Prime Minister Thaksin Shinawatra's son Panthongtae was keen on the subway advertising business.

Tale of two newspapers: Subway deal for Thaksin's son go or no go? - May 15, 2004

PM's son's company expected to win deal for subway system - Bangkok Post, May 15, 2004
How Come Entertainment Co, a new entertainment firm owned by Panthongtae Shinawatra, is expected to be awarded the sole concession to offer advertising space along the tunnels of the new Bangkok subway...
Putting the brakes on the Traid Network/How Come deal - translated and summarized from Matichon, May 13, 2004
[Ed.: This refers to the controversial deal that took away part of the subway advertising contract and gave it to the Prime Minister's son. Be careful of this type of story. Often before such a controversial deal is finalized, the press is told the deal is off. Then late on a Friday afternoon the contract is quietly signed anyway.]
MRTA is putting the brakes on the Traid Network/How Come deal since it violates the MRTA Act of BE 2545 which prohibits an advertising agency to subcontract to other agencies.
Furthermore, MRTA feel worried about safety of the ads in the subway stations since no flammable materials are allowed to be used in the subway system except those that produce nontoxic smoke.

Subway advertising deal closed - translated and summarized from Manager Daily, August 20, 2004
How Come claim they have successfully made a 500-million baht deal with BMCL and MRTA for the ads in Subway stations (Manager Daily - August 20, 2004). The ad from How Come will show up in Subway stations in October 2004. [Ed.: Don't miss the photo of the 'little executive' and the intemperate comments after the article.]

BMCL-MRTA following the order from Suriya for revenue sharing without lowering subsidiaries - translated and summarized from Prachachat Thurakij, November 4-7, 2004
BMCL and MRTA have agreed to make a settlement on revenue sharing on the Subway. Mobile phone services inside subway rolling stock will be done by MRTA. Radianz will have to handle the system maintenance instead.
MRTA governor will submit this settlement plan to the Board on November 10. After the plan has been approved, BMCL will start commercial development as soon as possible.
The revenue sharing scheme can be described as follows:
1) 7% of revenue from the 3rd party who pay rent to BMCL for ATM installation, public phones, and How Come Advertising signs will be handled to MRTA
2) Better revenue sharing scheme from subsidiaries such as Triads Network Communication (56% owned by BMCL) and Metromall Development (60% owned by BMCL) from the fixed 25% to BMCL to the gradual increased revenue sharing from 25-30% to BMCL. BMCL will pay 7% of that revenue to MRTA. However further revenue to MRTA will be under discussion.
3) Radianz Communication Network Co.Ltd. (75% owned by BMCL) will have to transfer all telecom deals with AIS, TRUE, and other mobile phone service providers to be handled directly by BMCL which already has permission from the Post and Telegraph Department. Radianz will handle only the maintenance. This scheme will enable BMCL to give full revenue sharing from the lucrative telecom deal to MRTA while BMCL still tightens its grip on Radianz. This will speed up the process so as not to get stuck with a decision by the Attorney General.
This settlement will make all the party involved feel very happy--more revenue for MRTA and BMCL and passengers will get very good telecom services while riding the Subway.
Mobile phone services will have a 5-year concession while How Come will have a 10-year concession, and Metromall will have 5-7 year concession with full right to have concession extended.

Subway: Commercial development begins - new extensions to be approved - Manager Daily, October 21, 2004

Subway deal still stalled: those 'at the top' want to turn the MRTA board into a rubber stamp of approval for their selfish interests - translated and summarized from Than Setthakij, January 9-12, 2005
The MRTA Board told Than Setthakij correspondents that those in the top of MRTA have their own selfish interests so they have added extra conditions to the commercial deals which MRTA Board would not approve--such 3-4 extra provisions. However the board already approved the first version of the plan. Therefore, the MRTA Board would reject the deal so that those at the top of MRTA would come up with a new plan in line with the MRTA's and BMCL's interests--but not those in the top's interests. Nevertheless, the MRTA Board told those at the top that they would come up with the legal details to explain the board about the extra provisions.
The long extended delay on MRTA commercial deals has caused 70% of the 504 shops to wait for the approved deal. The deal should be done by the end of January 2005 since BMCL and Metro Mall Development Co. Ltd. have stuck a deal with those who are going to rent the space and they thought that the MRTA Board and MRTA top brass could come up with compromises on the disputes.
The case of the latest dispute is not about an unfair deal at all since the MRTA Board has approved the BMCL's plan (25% for the first 6 years and 35% for the rest of the concession), but those in the top have added extra provisions. This is even though the very high and lucrative share from real estate deals could not match with the offer from Metro Mall.
In the 11 subway stations, only 100 sq meter of the 30,000 sq meter will be used for commercial purposes. 70% of commercial space has been leased by those who plan to sign the contract with Metromall such as 7-11 (Thailand), Central Retails, Minor Group, 5-star OTOP, Siam Kubota (subsidiary of Siam Cement PCL). The other 30% will be reserved for minor enterprises.
BMCL has told Howcome Entertainment Co.Ltd., Metromall Development PCL, and Triad Networks to wait until the commercial planned has received the final approval.
Metro Mall Development has a plan for 2.6 billion baht revenue in 10 years. This is giving to BMCL 947.4 million baht and BMCL will give MRTA 66.3 million baht. On the other hand, Triad networks will get revenue of 2.8 billion baht-- giving to BMCL 974 million baht and then BMCL will give 68.2 million baht to MRTA.

PM's son's firm wins 10-yr subway deal - The Nation, April 5, 2005

Tussles in subway commercial deals; BMCL vs MRTA - translated and summarized from Thairath, August 5, 2006 and Dailynews, August 5, 2006
Even today, the BMCL Commercial deal is not approved by MRTA yet since they cannot explain to MRTA about the 7% annual contribution to MRTA which derived from 25% of revenue sharing of 3 subsidiaries--the other 18% will belong to BMCL which can be paid back to the subsidiaries. This is a very bad deal since they have no plan to give more to MART when the venue increases. Furthermore, they cannot explain about the public safety inside the subway tunnels and stations after the commercial deal becomes a reality. The subcontract with How Come is not effective until How Come and BMCL can produce a convincing explanation.
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