Advanced Info Service

Advanced Info Service Plc (ADVANC)

Investment thesis: After attending the FY11 analyst briefing, we think that the key FY12 focus will be data revenue growth. 3G smart devices will be bundled with data packages, according to management. Our BUY rating stands, based on solid FY12 core earnings expansion, 3G license auctioning before YE12 and a good dividend yield.
Strong data revenue in FY12: The firm claims to have maintained its leading data market share, which it said was 54% for 3Q11, up slightly from 52% in 4Q09, bolstered by seamless data connectivity between WiFi, 3G and EDGE. A strong social networking growth trend and cheaper smart devices will make for 25% nonvoice revenue growth in FY12. About half of a forecast 5m handsets to be sold industrywide in Thailand this year will be smartphones, up from 25% in FY11. The ARPU of a smartphone is double that of a conventional handset. ADVANC claims 9m mobile data users, 70K WiFi hotspots and 200K WiFi subscribers. 
Bt0.99/min price cap for average or every minute? Management anticipates that the NBTC’s planned Bt0.99/min price cap will apply to an average minute, not for each minute, so won’t have much impact on ADVANC, as its current average charge/minute is Bt0.7-0.8/min. The NBTC said it wanted flexible rather than fixed tariff pricing. 
FD regulation clarification before 3G auctioning? Management said that the NBTC must interpret and clarify its Foreign Dominance (FD) regulation—especially with regard to nominee holdings—before 3G auctioning starts. ADVANC was emphatic ab out the legality of its shareholding structure.
Reallocation of DPC bandwidth before concession ends? The concession of ADVANC’s subsidiary, DPC, is due to expire in mid-Sept 2013. The firm asked the NBTC to re-auction DPC’s 1800MHz bandwidth before concession expiry, so that it can maintain its service quality in Bangkok and other heavy traffic areas. But the bandwidth remains the property of CAT until concession expiry, so CAT would have to agree to forego its rights (CAT also legally owns DPC’s network [BTO]).