Crumbling infrastructure, punitive government regulations and massive foreign debts have brought several local telecoms companies near breaking point since Thailand plunged into its worst recession in more than half a century.

And although some foreign capital will find its way into the most successful Thai telecoms firms, much of the industry will continue to stagnate until it is fundamentally reformed, industry analysts argue.

They say the industry needs to raise a minimum of $1billion over the next two or three years to upgrade its infrastructure and rebalance its books.

"In order to attract any significant amounts of new money, most telecoms companies will need a resolution of several problems," said Orawan Karoonkornsakul, Thai telecoms analyst at Merrill Lynch in Bangkok.

"They will need to clear up uncertaintyover government regulation, convert debt into equity and think about allowing new investors a measure of control," she added.

Analysts said Singapore Telecommunications Ltd's (SingTel) purchase of up to a fifth of Thai mobile phone operator Advanced Info Service (AIS) was little surprise.

AIS, which announced the deal on Thursday, is the least indebted of Thailand's telecoms companies. It has around half the Thai mobile phone market and its parent, Shinawatra, was in need of cash.

But, none of the other Thai telecoms firms is as attractive on paper and has as much potential for growth, analysts say.

Thailand's two fixed-line telephone companies -- Thai Telephone & Telecommunication Plc (TT&T) and TelecomAsia -- are heavily in debt and are forced to hand over a large proportion of their income to government agencies in return for operating rights.

This "concession system" deprives TT&T of more than a third of its gross revenue and takes smaller proportions from the balance sheets of the othertelecoms firms. The system has crippled the industry and left many firms unable to pay debt.

TT&T admitted defeat in September and stopped repaying the principal on its 38 billion baht ($1.04 billion) of debt.

Other companies, including cellular operator Total Access Communications, have been forced to roll over their foreign debts for several years to stay alive.

Industry executives say the only way most Thai telecoms companies will survive is if the whole concession system is scrapped, giving the government agencies -- Telephone Organisation of Thailand (TOT) and Communications Authority of Thailand (CAT) -- equity in return for their regular revenue.

But, there are huge problems with this. It would mean severe dilution of the existing equity of telecoms firms and the government agencies are about to be privatised, giving them little incentive to reach agreement with the concession holders.

Many analysts say the entire Thai telecoms industry needs a root and branch reorganisation with a series ofmergers and debt write-offs. Only then would most foreign investors, the only people with the money needed to rebuild the industry, come in.

Many analysts think several of the existing Thai telecoms firms may disappear completely over the next few years.

John Chessher, Asian telecoms analyst for Schroders in Tokyo, argues the Thai telecoms industry could end up with as few as two or three big players: TOT, which may absorb CAT, TT&T and possibly even Total Access, plus AIS and possibly TelecomAsia.

All survivors would have significant foreign shareholders.

British Telecom, AT&T, Cable & Wireless and Nippon Telegraph & Telephone Corp are all likely candidates as strategic partners for surviving Thai firms, analysts say.

"Thai telecoms probably needs several billion dollars but it will take a long time to find it. The shape of the industry is probably going to change radically," he said.