Analyst predicts telecom's service revenue to grow

According to a recent AIS filing to the Stock Exchange of Thailand, it expects service revenue to grow by 3-4 per cent this year, on continuously high data growth and greater coverage of its 3G service on 2.1 gigahertz. 

DTAC expects growth in its service revenue this year to be in the low single digits, underpinned by a recovering economy and mobile Internet growth. 

True group this year targets high-single-digit growth in its consolidated service revenue and has budgeted about Bt32 billion for capital expenditure, of which Bt18 billion is for its mobile-telecom services, Bt12 billion for the TrueOnline fixed-line business, and Bt2 billion for its pay-TV business TrueVisions. 

True aims for its fourth-generation wireless network to reach 80 per cent of the population by next quarter, complementing the TrueMove H 3G+ service on the 850-megahertz spectrum, which already covers more than 97 per cent. 

The analyst said True would gain a relative advantage if the auction of bandwidth on the 1,800MHz spectrum is further delayed and doesn’t take place by midyear, as the company already has a lot of bandwidth. The spectrum can be used for 4G service.

Such a delay would be bad news for AIS, especially if the auction does not take place this year. Without additional bandwidth, AIS is expected to face a shortage that should affect its service quality by early 2016.

However, AIS expects the 1,800MHz auction to be called by the telecom regulator in the third quarter of this year.

In its filing to the Stock Exchange of Thailand, True reported a consolidated net profit of Bt1.4 billion last year, compared with a loss of Bt9.1 billion in 2013, due to successful recapitalisation and its clinching of a strategic partnership with China Mobile. Its selling, general and administrative (SG&A) expenses dropped 4 per cent year on year.

According to the telecom analyst, after stripping out its exceptional items, including capital gains from selling telecommunications towers to the True Telecommunications Growth Infrastructure Fund and a sizeable tax refund in the fourth quarter of last year, the company’s consolidated pre-exceptional loss dropped to Bt622 million last quarter from a loss of Bt5.3 billion over the same period of 2013. 

True’s 2014 net loss excluding the tax refund and exceptional items of Bt4.6 billion was below the analyst’s forecast of Bt5 billion, thanks mainly to stronger-than-expected revenue from its mobile-phone service. 

True group’s cellular-service revenue increased 9.1 per cent year on year to Bt38.4 billion in 2014.

The company’s board of directors is proposing that True use shareholders’ equity to reduce negative retained earnings in preparing for dividend payment. The shareholders are scheduled to consider this proposal at their meeting late next month. 

The analyst said True should not pay out dividends in the near term as he expects its free cash flow to remain negative for the next few years. But as its net gearing has declined to 53 per cent, he believes there is room for True to draw down debt to fund capital expenditure and dividends. 

According to the company, True group’s net debt-to-equity ratio was 0.5 time at the end of 2014, dramatically lower than the 14.5 times at the end of 2013. 

True shares closed at Bt14.40 yesterday, down 1.37 per cent from Friday.