True Move back-down causes SET frenzy

True Move back-down causes SET frenzy

A buying spree in telecom blue chips emerged during Tuesday's afternoon session after True Corporation's mobile unit announced it will pull out of next week's re-auction of a 900-megahertz licence, leaving Advanced Info Service (AIS) as the only bidder.

The surge in telecom stock prices pushed the benchmark SET index up almost 1% to a peak of 1,411.02 before profit-taking in late trade pared gains, closing at 1,406.57, up 0.64% in heavy turnover of 52.94 billion baht. A rise in commodity prices also gave the index a boost.

AIS (ADVANC), its parent Intouch Holdings Plc (INTUCH), and True were at the centre of the frenzy. ADVANC, the country's leading mobile service provider by subscribers, soared 13 baht to 159.50 baht and also led in trading value. INTUCH jumped 3.75 baht to 53.75 baht, and TRUE added five satang to 7.40 baht.

Market sentiment turned upbeat after True's announcement as the move ruled out a potentially costly auction, said an analyst at Capital Nomura Securities (CNS) who requested anonymity.

The re-auction was scheduled after JAS Mobile Broadband, a unit of Jasmine International Plc, defaulted on its first instalment payment as of the March 21 deadline. Only two operators -- AIS and True Move H Universal Communication (TUC) -- picked up bid documents for the new auction. True said it believes it has sufficient bandwidth to serve its customers.

JAS won the first licence for 75.7 billion baht in December, 487% higher than the reserve price of 12.9 billion. TUC won the second licence for 76.3 billion baht or 491% above the reserve price.

The CNS analyst said the licence price at an auction would likely match JAS's winning bid.

Asia Wealth Securities analyst Narudon Rusme said True's decision will keep AIS's costs low for the 900MHz spectrum. He estimated AIS's cost to provide service on the 900MHz bandwidth will stand at 17 baht per subscriber per bandwidth, based on a potential winning licence bid of 75.7 billion baht.

True's cost is at 25 baht per subscriber per bandwidth based on its winning price at 76.3 billion baht, said Mr Narudon.

In the meantime, Fitch Ratings said Thai telecom operators will face increasing pressure as the rate of growth in data revenue is likely to slow in 2016 and 2017.

Growth in data subscribers started to decelerate in the last few quarters as smartphone penetration rises. In addition, the growth in data usage for existing data subscribers is not translating fully into higher revenue, given the fierce price competition in data.

Thai mobile operators' data revenues might not grow sufficiently to offset declines in legacy voice and SMS revenues the next two years, said Fitch. Fitch believes the pace of growth for data subscribers the next two years will be slower as telecom operators penetrate deeper into the lower-tier segment.

"These subscribers are generally more reluctant to change to a smartphone, as they use mobile phones mainly for voice calls, making them less likely to benefit from 3G and 4G data networks. Operators may need to offer more incentives, such as deep tariff cuts and handset subsidies, to accelerate data service adoption," said Fitch.

Smartphone users in Thailand grew moderately in the first quarter, making up 60% of the total mobile subscriber base.

Growth in data usage for existing data subscribers this year and next will be supported by the increasing popularity of video and music streaming, but higher revenue from this growth is likely to be minimal because the average revenue per user increase will be limited by the competitive pressure and continued offerings of unlimited data or large data packages, said Fitch.

In the medium term, non-voice revenue growth will be driven by subscriber growth. However, operators will need to monetise data better to achieve revenue growth in the longer term when data penetration approaches saturation. This requires adjusting data pricing away from unlimited packages to a tiered approach, it said.

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