Dtac to benefit the most
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Total Access Communication (Dtac) stands to benefit the most from the 3G licensing, following the Administrative Court's decision on December 3, said a brokerage house.
“The operator that will benefit the most from this issue is Dtac,” said Asia Plus Securities in its research note.
Dtac’s net profit growth in 2013 is projected at 18% as now the company is paying income sharing of 30 per cent of its total income. Meanwhile, Advance Info Service (Advanc) will get less benefit because its current income sharing is lower at 25 per cent, so net profit growth in 2013 is estimated at only 12 per cent on year.
On December 3, the Administrative Court landed the decision to throw out the ombudsman’s petition. This posted a benefit on the ICT sector as it cleared way for the NBTC to grant the 2.1 GHz-3G licenses to the mobile operators by the end of December. The 3G network installation will then be conducted, followed by a commencement of 3G service in Bangkok and other big cities since 2Q13, which will enhance efficiency and capacity of data service because the current concession has limitation in capacity 3G standard. Moreover, under the new concession, operators’ cost of service will decrease significantly from a decrease of income sharing from 25-30 per cent of total service income to only 10-15 per cent (license cost included). After the 3G service starts, there will be continuous migration of 3G customers from the current license which has high cost to the new license which has lower cost, on an assumption that the operators would be able to carry migration of high net worth customers (10 per cent of total customers) to the new license in 2013.
Asia Plus noted that though the lawsuit dismissal confirms that the new 3G service will surely be provided by 2013, prices of some stocks in the sector have already risen to reflect the news, especially Advanc which has only 13.6 per cent upside left now.
The house maintain neutral weighting for the sector and select Intouch (with face value of Bt86) and Dtac (with face value of Bt110) as top picks because they have the highest upside of 30.8 per cent and 26 per cent respectively. We also reiterate buying Advanc (with face value of Bt250) when the price weakens.
