Telecom shares take a plunge
SHARE PRICES of the four major telecom operators declined heavily yesterday on the possible negative impacts of the surprising outcomes of last week’s auction of licences on the 900-megahertz spectrum.
Advanced Info Service (AIS) shares plummeted 19.43 per cent to close at Bt155.50, while those of Total Access Communication (DTAC) slid 26.97 per cent to Bt27.75.
True’s share price fell 8.97 per cent to close at Bt6.60, while Jasmine International nosedived 22.59 to Bt3.70.
After the end of four days of bidding on Saturday, True Move H Universal Communication (TUC) and Jas Mobile Broadband (JASMBB) won licences on the 900MHz spectrum at Bt76.3 billion and Bt75.6 billion respectively, almost five times the minimum starting bid. The other two bidders were AIS and DTAC.
A telecommunications analyst said he expected competition to intensify after this auction. DTAC, which did not win a licence, will face spectrum constraints and could resort to a pricing strategy to defend its market share.
He added that the major unknown factor that would determine the degree of competition was whether JAS had a strategic partner.
Yesterday JAS disclosed that it was in talks with potential partners but declined to specify their names. The talks have yet to be wrapped up.
The analyst, who declined to be named, believes that AIS is still in the best position among all players, since DTAC and True were weakened by the auction outcomes.
DTAC now faces spectrum constraints, while True has loaded on a large pile of debt from the auction. Even without bandwidth on 900MHz, AIS is unlikely to suffer spectrum constraints in the next few years as it did win a licence at the 1,800MHz auction last month, the analyst said.
DTAC has affirmed that it has sufficient spectrum bandwidth on the 2.1-gigahertz, 850MHz and 1,800MHz spectra to provide quality service to subscribers.
However, the analyst expects that AIS’s capital expenditure is likely to be higher than his previous forecast as the company will have to deploy a fourth-generation network on the 1,800MHz spectrum, instead of on 900MHz – the latter requires lower capital expenditure.
The main concern is on migration of AIS’s 11 million subscribers, who account for 30 per cent of its subscriber base, who are still on the 900MHz 2G network, to the 2.1GHz network within weeks before its 900MHz network is shut down.
AIS is likely to offer subsidised handsets to encourage customers to migrate to the 2.1GHz network, which might cost the company close to Bt20 billion.
DTAC is in the worst position after failing to win any new spectrum. It will have to build more telecom towers to further utilise its existing 2.1GHz spectrum and more of the 1,800MHz and 850MHz spectra – the latter two come with high regulatory and depreciation expenses.
DTAC is in talks with its concession owner CAT Telecom for a possible deal to offer 4G service jointly on CAT’s 1,800MHz band.
With a spectrum disadvantage, DTAC is expected to continue to lose market share and the high 1,800MHz/850MHz cost will have a serious impact on its earnings, the analyst added.
True now has the best spectrum portfolio but the worst balance sheet among the three players, the analyst said.
The 900MHz spectrum depreciation and funding cost is estimated to be Bt9.7 billion per year, and True will have to gain market share to make the spectrum acquisition worthwhile. But winning market share in the next few years may not be as easy as in the past given the entry of JASMBB, which will spark intense competition.
According to CIMB Securities (Thailand), as the three dominant operators failed to maintain the status quo, a cut-throat price war looms.
