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Communication sector brings up the rear as operators struggle to add value

The communication sector continued to languish in 2002, producing a sickly one-year total shareholder return (TSR) of -24.37%, the lowest on the Stock Exchange of Thailand. But for investors in for the very long haul, communication stocks have produced the best 10-year return on the market, at 8.71%. In fact, the sector is one of only seven with returns in positive territory over a decade.

While telecoms companies worldwide rethink their strategy and regret huge investments in new technologies that have been slow to find a market, local companies believe that only by adding value to core services such as fixed-line and cellular can they improve their financial returns.

Of the 11 companies in the sector, only Samart Corp had a positive one-year TSR, at 2.09%, reflecting in part the head start Samart has had in repositioning itself as a diversified service provider. Second place went to Internet Thailand, with a tiny market capitalisation of 1.1 billion baht and a TSR of -6.83%. Next came cellular leader Advanced Info Service, which is capitalised at 104.1 billion baht and accounts for 62% of the sector's total market cap of 167.7 billion. The company delivered a one-year TSR of -12.1% but has impressive five- and 10-year numbers of 9.38% and 14.15% respectively.

The worst performer was Bangkok fixed-line operator TelecomAsia with a one-year TSR of -54.9%, followed by Jasmine International (-42.86%), which is just still in debt restructuring.

The bellwether of the sector remains AIS, which trades under the symbol ADVANC, given its sheer size, according to Prasit Sujiravorakul, an analyst with Capital Nomura Securities Co. The mobile phone sector, dominated by AIS with nearly 11 million customers, was expected to continue growing this year but at a slower rate than last year, said Mr Prasit. Having huge net new users is no longer a guarantee of a good performance, since many new customers are low-margin prepaid users.

Revenue per line of AIS's prepaid service is 350-400 baht a month from eight million customers, while 2.5 million postpaid customers generate an average of 1,150 baht a month.

The country currently has 17 million mobile phone users and is expected to gain five million more this year, against nearly six million last year.

Mr Prasit said cellular operators' strategy now was to maintain their existing customer bases and increase revenue per line from related business, such as non-voice services.

AIS president Somprasong Boonyachai said he was satisfied with the company's direction, transparency to shareholders and professionalism.

``I personally think that what makes us stand at the forefront is mainly what we have done. We always delivered what we have promised, for the benefit of all parties concerned,'' he said.

In the fixed-line business, revenue from basic voice service has improved marginally. However, the core business of TelecomAsia finally reached the break-even point in the second quarter of 2002. The company invested heavily last year, though, in launching its cellular subsidiary, TA Orange Co, and analysts are watching closely to see if the newcomer can find a niche in a market dominated by AIS and DTAC.

TA president Supachai Chearavanont says additional services were in the pipeline to make TA a multi-access provider, with packages tailored to individual and corporate users. They include Internet access and services provided through new broadband technology.

TA has sold nearly two million of its 2.6 million lines, with average monthly revenue of 620-640 baht per line. The company aims to sell another 200,000 lines this year. _Mongkol Jullayothin

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