DTAC may hike 3G expansion budget

Total Access Communication (DTAC) may have to raise its investment budget again this year to support the expected rapid increase in customers for third-generation wireless broadband. 

DTAC has already increased its investment budget from Bt8 billion to 12.5 billion in the first quarter of this year, and the budget is Bt34 billion for the three-year (2013-15) investment plan, said Chatsuda Santanond, head of investor relations.

The investments may be relatively heavy in the first year, she said. They will be funded entirely by loans in view of the projection for relatively low interest rates. However, issuance of debentures is another alternative.

DTAC expects single-digit revenue growth and 30-31-per-cent growth in earnings before interest, tax and depreciation (EBITD). It believes its investments in its 3G network this year will translate into clear growth figures next year.

During the current transition stage from 2G to full 3G, it is quite difficult to project market growth. However, after the current second quarter the picture should become clearer as 3G networks are fully in place and fully utilised by users. DTAC says it will strive to maintain its current market share of 30 per cent amid expected stiff competition. 

KGI Securities expects DTAC to focus on the Northeast, with plans to spend about Bt7 billion, or 20 per cent of its investment budget for the 3G 2.1-gigahertz network, as that region’s growth potential is better than other parts of the country. 

According to Thanachart Securities, DTAC’s first-quarter operational results exceeded expectations, with the main supporting factor being strong revenue from data services. The house has raised its projection for DTAC’s net profit for 2013-2015 to 14 per cent to reflect the higher revenue from data by 69 per cent in the first year, 40 per cent in the second and 30 per cent it the third, as well as the projected profits from the growth of smart phones and 3G-2.1GHz next month amid expected reductions in roaming costs.

Thanachart Securities advised investors to buy DTAC stock based on improved operational results, which dipped 5 per cent in 2011 but look to turn around to 23-per-cent growth this year, with projected growth of 40 per cent in 2014. DTAC stock is still a reasonable buy when compared with the three-year EBITD growth of 23 per cent and attractive dividends, maintained at 4.6 per cent for this year and 6.6 per cent for next year.