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Caution in telecoms

Uncertainty about the telecoms deregulation process has affected investment sentiment in the Communications sector, though the outlook for the cellular market appears clearer.

The prospect for shareholder returns is dimmed by most operators' need to make continuous and substantial capital investments in order to keep up with fast-rising growth in demand.

Total nine-month net profits of the listed companies in the sector were up by 448% this year, to 5.8 billion baht from 1.06 billion last year, according to Supakorn Sujiratanawimol, deputy vice-president of UOB-Kay Hian Securities.

Among the 10 firms on the Shareholder Scorecard, International Engineering Plc led with a one-year return of 68%, followed by Advanced Info Service at 22.1%. TelecomAsia trailed at -54.8%.

The customer base for both fixed-line and cellular services has been increasing, with explosive growth in the latter segment. As a result, cellular companies have started to gain market share from fixed-line operators.

Furious competition has doubled the number of cellular subscribers to nearly seven million this year. AIS has four million, including about 300,000 from its small affiliate, Digital Phone Co. Total Access Communication has 2.8 million. AIS reported a net profit of 5,689 million baht for the first nine months of this year, up slightly from 5,332 million a year ago. AIS president Somprasong Boonyachai said the cellular market would be even more competitive next year with the arrival of CP Orange.

TelecomAsia, the Bangkok fixed-line operator, reported nine-month losses of 520 million baht, a big improvement over the 3,183 million baht last year.

Ms Supakorn said TA had benefited from healthier fixed-line sales, and the additional revenue from its PCT and other value-added services.

TA president Supachai Chearavanont said the company's revenue was up by about 12% year-on-year. He acknowledged that cellular operators were starting to gain market share, which was why TA was introducing new services such as broadband.

The provincial fixed-line operator, Thai Telephone and Telecommunication, pared its nine-month losses to 375 million baht from 3,395 million. It has sold 75,000 lines this year, but average revenue per line is down. The cellular boom has eaten into the long-distance revenue on which it relies heavily.

TT&T president Pisit Leeahtam said, however, that value-added services, such as data communications, offered new business opportunities for TT&T.

- Mongkol Jullayothin