Total Access Communication

Price Target: Bt88.00

CAT Telecom CEO confirmed that the Attorney General had officially agreed to allow DTAC to launch its commercial in-band 3G services on 850MHz. After CAT Telecom had requested for a legal opinion from the Attorney General twice if the services breached the concession contract and Joint Venture Act, it eventually informed DTAC that it could operate the services and the commercial launch date would be at DTAC’s discretion.

Comment: This is a positive development for DTAC. With Thailand’s cellular penetration rate at over 110% currently, further growth of voice revenue would be limited, leaving only data services as revenue growth driver. In our view, the growth momentum of data services should remain strong at 30% p.a. over the next few years. The share of non-voice income should grow to c.18% of DTAC’s total income by the end of this year from 15% currently.

Although its share price has surged 76% YTD, DTAC remains attractive for the following reasons: (i) low earnings volatility, (ii) minimal negative impact from a global slowdown, and (iii) compelling dividend yields. DTAC is offering 20.4% dividend yield for FY11F (6.9% normal plus 13.5% special) and 6.6% in FY12F based on 100% payout. The stock also offers 19% upside to our DCF-based target price of Bt88. We reiterate our Buy call for DTAC, which remains our top pick in the Thai Telecom sector. The key share price catalyst would be a special dividend, expected to be announced by the end of this year.