Telecom

Telecom

 

JAS did not show up to make its payment for the 900MHz license, abandoning its attempt to edge into cellular service. This has been expected and prices of all three current players have surged from 36-45% YTD. With JAS officially out of the running, we have raised target prices of all three by 15% after reducing WACC to factor in no new player. Recommendations, however, are unchanged: ADVANC and DTAC remain Neutral since current share prices are close to our new target prices and TRUE is a BUY with DCF-based target price of Bt11.7-12 since it is now even better positioned to gain even more revenue market share.   

 

News: The National Broadcasting and Telecom Commission (NBTC) announced that JAS missed the March 21, 4.30 pm, deadline to pay for its 900MHz license.  

 

The NBTC will report this to the Prime Minister (PM) by March 24 and decide how to handle this. It still wants to hold a new auction within four months, setting the starting price at JAS’ winning bid of Bt75.56bn. If there is no interest at that price, the license will be held back for twelve months and then a new auction held – but at the same starting bid.  

 

JAS will lose its Bt644mn bank guarantee to the NBTC and will be required to pay another Bt160mn for the new auction. JAS will also be barred from any future auction. There will be no other damages applied to JAS at this stage. 

 

Implication: This is good news to players in the mobile sector as it removes the threat posed by a newcomer. At the same time, it was in the news for some time and prices have already been driven up. DTAC and TRUE have gained the most with share prices up by 45% YTD, followed by ADVANC, up 36% YTD. We now reduce the discount rate (WACC) applied to all three companies since they will not face more competition and this raises the target prices of all three by 15%: ADVANC goes up to Bt207 (from Bt180), DTAC to Bt40 (from Bt35) and TRUE to Bt11.7-12.0 (from Bt10.2-10.5). 

 

When the new auction is set up, we do not expect to see either DTAC or ADVANC bidding if the starting price remains at Bt75.56bn – the steep price is what led them to exit last time, saying it had gone up beyond its value. This means TRUE will be the sole operator on 900MHz for at least a year.  

 

Action: We maintain our Neutral rating on ADVANC and DTAC as their share prices have risen to our new target prices already. We reiterate our Buy call on TRUE on the belief it is on track to gain further revenue market share. TRUE is a buy with DCF-based target price of Bt11.7-12.