Total Access Communication

Total Access Communication Plc (DTAC)

Consumer confidence rebuilding hit a bump. Consumer confidence had been in the
process of recovering, with customers flowing in via number portability early in the
quarter – but then August 28 brought another network problem that affected around
20% of DTAC’s customers, likely hampering the recovery. DTAC will compensate its
customers, but they must call in to register. DTAC will give 80 minutes free calls to
prepaid customers and 100 minutes free calls to postpaid customers who register. For
postpaid customers subscribing to monthly packages, there will be no change in
minimum monthly fee, and thus little change in this group’s ARPU. According to
DTAC’s Investor Relations team, it is too early to estimate the impact on revenue but it
is confident that net effect will be considerably less than the Bt270mn compensation
when the network outage impacted around 90% of subscribers at the end of Dec 2011.
3Q12F earnings to drop 11% YoY and 2% QoQ to Bt2.7bn. The combination of the
rise in concession revenue sharing (from 25% to 30% from mid-Sep 2011), the higher
network opex from running duplicate networks until the network swap is completed
plus the network problems that curtailed service revenue growth lead us to expect a
fall in DTAC’s 3Q12F earnings of 11% YoY and 2% QoQ to Bt2.7bn.
Forecast Bt1.15 interim DPS on 3Q12. DTAC announced at its last analyst meeting
that it plans to pay quarterly dividends. We estimate the 3Q12 dividend at Bt1.15
based on 100% payout.
The least 3G price appreciation despite most benefit from 3G-2.1 GHz license.
DTAC price is laggard at +28% YTD vs. ADVANC +52% and TRUE +61%. DTAC’s 2013F
EV/EBITDA of 8.5x is cheaper than ADVANC’s 10.3x but slightly above TRUE’s 8.3x. This is
surprising since DTAC is expected to do the best off the new 3G license in terms
regulatory cost savings after migrating subscribers to the new license. The reason
behind the underperformance is believed to be negative sentiment but we expect
investors to put that behind them soon and shift to focus the 3G pluses.
Maintain Buy and Bt100 TP. DTAC price lags peers sharply – although it is the one
that is expected to benefit the most from the switch to 3G. On this basis, we reiterate
Buy and our mid-2013 TP of Bt100 based on DCF method (WACC of 9.3%, terminal