Advanced Info Services

Advanced Info Services 

With demand growing for digital services, ADVANC’s new strategy is to transform into a “digital life” service provider not just an ordinary mobile operator. To achieve this, it will focus on fixed broadband with a goal of 10mn home-passes within five years (or 50% coverage). This appears a good move, getting it in on the ground floor of digital services on all platforms. Buy with TP of Bt300.  

 

Becoming a digital life service provider ADVANC held the “2015 AIS Vision” event at Paragon Hall yesterday at which it unveiled its five-year business plan, “LIVE Digital LIVE More”. The key message is that ADVANC will move from traditional telecom service to “digital life” service provider, with a broadening of its focus to fixed broadband and digital content from simply wireless. We like this new strategy, seeing it as placing ADVANC in an excellent position to capture growing digital service demand. The key takeaways from the events are given below.  

 

1) ADVANC sees strong telecom demand continuing in 2015 with 3-4% growth in mobile business, 10% in device trading and 15% in fixed broadband. The growth driver for mobile will be mobile Internet usage not voice. Over the next five years ADVANC expects data usage to grow 200-400% YoY with smart devices to grow over 50mn. To accommodate the rising demand for Internet access, ADVANC has budgeted capex of Bt40bn in 2015, close to that of 2014. 

 

2) Mobile: ADVANC plans to invest ~Bt30bn to add more 3G base stations and small cells to reach 29K base stations by end-2015 from 20K in 2014, giving it more than all other operators. The capex includes the cost of upgrading AIS Wifi to AIS Super-Wifi with speed of 650 Mbps from 30 Mbps currently.    

 

3) Fixed broadband: ADVANC will access 120K km of core fibre optic nationwide to supply a new fixed broadband technology, Fibre-To-The-Home. The maximum speed for FTTX is 1Gbps (3 times faster than 3G). It expects 300K home-passes in 2015 with target subs of 80K. Over the next five years, it expects to become a major fixed broadband provider with ~10mn home-passes·          

 

4) To differentiate itself, ADVANC will provide exclusive digital services through partnership with content providers and business partners. Services include AIS Play Box - a digital box for home entertainment with Iptv and games, AIS Cloud+ - for consumer online storage, AIS e-Money - financial services through partnership with financial institutions and AIS Business Solutions - M2M. 

 

Broadband thrust is new. ADVANC is determined to jump into fixed broadband with both feet, making it the second convergence play in Thailand, behind TRUE. We see this as an opportunity for ADVANC as fixed broadband is far from mature and the new technology FTTH means everyone will have to invest – even incumbents TRUE and 3BB. We do not see ADVANC as a threat to TRUE as much as to DTAC and JAS.  

 

Buy, TP Bt300. Valuation is attractive, trading at 16.2x 2015PE and falling, making this a good time to get into ADVANC, which has strong average earnings growth of 20% in 2015-16 and a high dividend yield of 5.4% in 2014 and 6.4% in 2015.