Thaicom

Thaicom Plc (THCOM)
 

What’s new? Col Settapong Malisuwan, the chairman of the NBTC's telecom committee, said that the NBTC will soon issue a network provider (Type 3) license to THCOM for the planned Thaicom 7 satellite. The license will not require spectrum auctioning. The licensee will be subject to: 1) a 2% annual business license fee and 2) a 3.75% Universal Service Obligation (USO) fee. Ms Suphajee Suthumpun, CEO of THCOM, said the firm is in the final stage of getting a license for Thaicom 7.
Background: Thaicom 7 is a partnership between THCOM and Asia Satellite Telecommunications Co Ltd (AsiaSat) enabling THCOM maintain rights to its 120 degrees East orbital slot. Under ITU rules, the 120 degrees orbital slot—which had been satellite-less for two years—had to have a satellite to positioned there by Jan 2012 or it would have been reallocated to another party. In order to maintain possession of the position ahead of the launch of Thaicom 7 in 2014, AsiaSat moved one of its existing satellites there. Thaicom 7 will have a 15-year operating life and a total of 28 C-band transponders. THCOM will be allocated 14 C-band transponders under this partnership.
No spectrum auction requirement: We believe that the above news is positive for THCOM in that it will receive a business license from the NBTC and there won’t be a spectrum auctioning requirement (hence, no huge lump-sum upfront spectrum fee). 
Two benefits from Thaicom 7: Firstly, the funding structure will boost THCOM’s cash flows and income statements during the pre-launch phase in FY12-13 because AsiaSat will pay the entire initial investment cost and THCOM will make installment repayments to AsiaSat twice a year throughout the lifespan of the satellite. Secondly, the cost structure is a lot lower under a Type-3 NBTC license than under the concession regimes that govern its other satellites. Thaicom 7 will pay 6% of gross revenue to the NBTC against revenue-sharing obligations of 20.5-22.5% (22.5% starting Sept 2016) under its ICT Ministry concessions.
Action: We will factor the incremental value of Thaicom 7 into our model during 2H12-1H13 when we have more information about the revenue structure of the joint venture with AsiaSat. Our preliminary numbers suggest scope for upside to our DCF-based valuation in the Bt2-3/share range. Our BUY rating stands, premised on: 1) anticipation that THCOM will post a strong bottom-line turnaround this year, 2) a cheap 1x PBV and 3) upside with the launches of Thaicoms 7-9.