DTAC posts record profit drop in Q2

DTAC posts record profit drop in Q2

Operator revises outlook for the year

A woman chats on her phone while walking past a billboard for DTAC, Thailand's second-largest mobile operator. The company reported a 90% plunge in second-quarter net profit as the prepaid customer base eroded. PATTARAPONG CHATPATTARASILL
A woman chats on her phone while walking past a billboard for DTAC, Thailand's second-largest mobile operator. The company reported a 90% plunge in second-quarter net profit as the prepaid customer base eroded. PATTARAPONG CHATPATTARASILL

Total Access Communication (DTAC) saw a record plunge in second-quarter net profit, dragged down by handset subsidy campaigns, massive marketing and network depreciation costs and a weaker prepaid customer base.

The country's second-largest mobile operator has revised its outlook for 2016, saying the company's full-year guidance on revenue growth will be lower than expected.

The margin on earnings before interest, tax, depreciation and amortisation (Ebitda) is expected to remain at 31-33%, on par with last year's level.

DTAC earlier projected a slight increase in service revenue this year.

The company reported a net profit of 141 million baht in the second quarter, down 90% from 1.26 billion baht in the year-earlier period.

Service revenue in the second quarter was 19.8 billion baht, down 10% year-on-year, due to intense competition, especially in the prepaid market.

DTAC lost 720,000 prepaid customers in the second quarter alone, bringing its total to 25 million subscribers, a decline of 7% year-on-year.

Its first-half profit totalled 1.40 billion baht, down from 3.67 billion last year. First-half revenue amounted to 41.5 billion baht, down from 44.8 billion.

DTAC has approved a dividend payment of 42 satang per share.

Lars Norling, chief executive of DTAC, attributed the plunge to high spending on prepaid handset subsidies to defend the company's market position.

Selling, marketing and general administrative expenses, excluding a one-time organisational restructuring cost, were well under control despite the high level of competition, he said.

The cost of services also declined from lower regulatory costs, though these were partially offset by higher network operating expenses. As a result, the Ebitda margin for the first half of 2016 climbed to 33.6%, compared with 31.5% in the same period a year earlier.

Depreciation and amortisation expenses rose due to continued investment in the network, resulting in a decline in revenue.

Mr Norling said DTAC was pleased to see the continuing strong growth in the postpaid segment. This reflects the improvement in network quality and perception, handset campaigns and expansion of retail shops.

DTAC added 191,000 postpaid customers in the second quarter, contributing an increase in revenue of 9.2%.

In addition, Mr Norling said data revenue growth had also accelerated, mainly driven by video and music streaming services.

Mr Norling said DTAC allocated 20 megahertz of bandwidth on the 1800MHz spectrum, the largest in the market, to provide 4G service in Bangkok and metropolitan areas.

"We plan to expand our 4G network to cover all 878 districts in Thailand by September in order to serve the strong growth in demand for mobile internet," he said.

DTAC installed 17,388 additional 3G/4G base stations during the past 12 months.

The prepaid segment has been facing several challenges, including widespread handset subsidies, aggressive mobile number portability campaigns, and the continuing trend of prepaid subscribers migrating to postpaid.

Mr Norling also said spectrum is not a short-term concern for DTAC as the company already has a strong spectrum portfolio with a 50MHz bandwidth.

Moreover, DTAC has every intent to participate and win additional spectra in future auctions.

"We would also like to encourage the regulator to put forward a clear spectrum roadmap for the industry in order for all players to better make long-term business plans," Mr Norling said.

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