Fitch Ratings says it expects growth of Thai mobile operators' service revenue to accelerate in the second half of 2019 as competition in the sector eases.
In the second quarter of 2019, all major mobile operators in Thailand gradually began phasing out the generous fixed-speed and unlimited prepaid data plans originally launched in 2018.
Nevertheless, earnings before interest, tax, depreciation and amortisation (ebitda) could remain flat in 2019, as Fitch expects network-related costs to offset revenue growth.
Fitch sees Advanced Info Service (AIS) improving mobile service revenue growth in the second half of 2019. The company continues to move its subscribers with fixed-speed and unlimited data plans to higher-priced plans.
While AIS still has a lot of prepaid subscribers left under these unlimited data plans, the plans will gradually expire in the second half of 2019.
In the second quarter of 2019, AIS's mobile service revenue grew 5.5% year-on-year, compared with 1.2% growth in the first quarter.
Fitch expects mobile service revenue at Total Access Communication (DTAC) to continue to drop in 2019, but at a slower rate of 1-2%, compared with a 5.8% fall in 2018.
The reduced price competition, a recent spectrum acquisition and ongoing network investment should help improve DTAC's service and network coverage and revenue growth in the second half of this year.
In the second quarter of 2019, DTAC's service revenue declined 5.3% year-on-year, compared with a 7.1% drop in the first quarter.
Fitch expects Thai telecoms' operating profits to remain under pressure due to increased network operating costs as operators continue to expand their networks. DTAC's ebitda is likely to fall 10%-11% to 24.5 billion baht in 2019.
DTAC's earnings will also be affected by payments to CAT Telecom for equipment rental and to TOT Plc for use of the 2.3GHz spectrum.
In the first half of 2019, DTAC's proportion of network operating expense to service revenue increased to 25.9% from 18.4% in 2018. Fitch expects DTAC's ebitda margin to decline to 34%-35% in 2019 from 37.8% in 2018.
Fitch anticipates AIS continuing to benefit from its strategy of diversifying its telecom business into fixed-line broadband, a segment that has shown greater stability and growth prospects than mobile over the past few years.
Still, Fitch predicts flat ebitda for AIS at 74 billion baht in 2019, as its service revenue growth could be offset by increased costs.
In the first half of this year, AIS's network operating expenses rose by 19% year-on-year, outpacing service revenue growth of 6.1%, while ebitda margin dropped to 42.7% in the first half of 2019 from 43.5% in 2018.